The observations made by the US State Department’s reports on global fiscal transparency for two consecutive years, 2015 and 2016, about Bangladesh, were identical; the latter was among 64 countries that had failed to maintain the minimum fiscal transparency.
The reports said the Bangladesh government’s budget documents highlight allocations and expenditures to different ministries and departments. But those lack information about allocations and details of the fiscal performance of the state-owned enterprises (SoEs). There is also a lack of transparency in the matters of allocations to and expenditures of the executive offices. The US reports find the fiscal transparency situation better in three other South Asian countries: India, Nepal and Sri Lanka.
The problem with fiscal transparency in the public sector entities is nothing new. It has gone deep into the system as the case is with corruption. In fact, fiscal non-transparency and systemic corruption are twins moving hand in hand in Bangladesh. Volumes have been said and written about the scourges, but the fact remains that instead of subsiding both have gained strength over time. The impact of such undesirable developments is being felt both in private and public sectors.
Barring fiscal non-transparency involving the SoEs and executive offices, as mentioned in the US State Department reports, the problem is very much evident in the development project execution and procurement of goods and services in the public sector. The country’s financial sector and capital market are also not immune to the plague of fiscal non-transparency. The Office of the Comptroller and Auditor General (CAG) is not adequately serious in punishing officials involved in non-transparent financial dealings. The CAG makes inordinate delays in placing the audit reports in parliament and this makes the entire exercise largely futile.
Starting from the selection of public sector development projects down to their implementation, non-transparency reigns supreme. Alongside selection of routine projects, very often projects are taken up under political considerations. Resistance from the Planning Commission (PC), on most occasions, fails to thwart such moves.
The Ministry of Finance has already prepared a draft Public Financial Management (PFM) reform strategy for the period of 2016-21 to ensure proper use of resources and better execution of the national budget. The preparation of an action plan would follow. The government, however, had prepared an identical strategy for 2007-12. But the formulators can hardly claim any major success in meeting the objectives behind formulating the PFM strategy.
The non-transparency is not only confined to public sector development expenditure. It is very much prevalent in both revenue mobilization and spending. There were moves in the recent past to reform the public sector expenditure. But there was hardly any progress since neither politicians nor top bureaucrats were ever serious about it. As far as non-transparency is concerned, there is a symbiotic relation between the two groups. However, the latter has always been a sly bunch of people who can efficiently wriggle out of any difficult situation, exposing the political elements often to an unsavoury situation.
The state of non-transparency in the country’s financial sector has now reached a new height. This is evident from the current high level of non-performing loans (NPLs) both in private and state-owned banks. A good number of public sector banks are scam-hit. The share of their NPL in the total outstanding loans is around 23% and that of private commercial banks is over 5.0%. The share of NPL in the total outstanding loans of the banking sector, officially, is more than 10%. These are the statistics available with the central bank. But it is widely believed that the size of the NPL would be bigger than what the official statistics say since there is non-transparency in the preparation of the financials, allegedly, by a good number of private banks. These banks usually resort to window-dressing to make their balance sheets better-looking.
Non-transparency has also been playing a dominant role in trade transactions and tax payments by individuals and companies, both local and foreign. Allegedly, large amount of capital is being taken out of the country through miss-declarations in trade transactions and transfer-pricing. Various mechanisms are used to transfer funds out of the country illegally. But these two are mostly availed by unscrupulous traders and foreign companies for capital flight. Relevant international organizations have reported illegal transfer of funds worth billions of dollars from Bangladesh. Though the government leaders and a few organizations are making loud promises to retrieve these funds, but one does not find any valid reason to pin one’s hope on those.
The stock market is another important area which is deeply hurt by fiscal non-transparency. Apart from manipulations of all sorts, a section of companies do very often make use of cooked financials at the time of their listings and also later to cheat the shareholders. Some unscrupulous audit firms are found helping an equally unscrupulous section of sponsors of listed companies.
The situation with the Bangladesh stock market has reached such a level that investors, both local and foreign, find no reason to put faith in it. After the latest collapse in 2010, the government has tried in various ways to help instill investors’ confidence in it, but the efforts have largely failed. The market has remained stuck-up at one point.
One can well understand the state of affairs with the Bangladesh equity market. At the moment, the international investors are pouring in large funds in emerging and frontier markets at a record pace. But Bangladesh is not being able to attract the same since international investors do not have enough confidence, mainly because of the lack of transparency and high level of manipulation in the capital market.
The fact remains that the lack of transparency in financial matters is ominously present everywhere. Despite the fact such a major shortcoming has been taking a heavy toll on the national economy, those who occupied power, through democratic means or otherwise, have never tried to straighten things. Rather, they have allowed the situation to worsen.
The writer is a senior journalist. He can be reached at zahidmar10@gmail.com
