Economist M Masrur Reaz, chairman of Policy Exchange Bangladesh, suggested stronger banking reforms alongside offloading state assets to create fiscal space for the next wave of economic growth, which Bangladesh cannot afford to sacrifice.
In an interview with TIMES of Bangladesh’s Mahfuz Ullah Babu, he said there is no easy or quick solution to the banking crisis and that structural correction cannot be delayed further.
“Some vulnerable banks and non-bank financial institutions will have to be closed. The rest, if viable, must be given time under strict guidelines and regulations to stand on their feet. Those that cannot survive must be closed.”
On non-performing loans (NPLs), which have surpassed one-third of banking assets, he said most are unlikely to be recovered and keeping them on balance sheets distorts the sector.
“They remain on banks’ books, making the country’s banking landscape look weak to international markets.”
NPLs must be removed through a distressed asset management company, he said, noting that legislation to establish such an entity has been pending for 18 months and should now be treated as a priority.
He also called for tougher action against wilful defaulters, arguing that the Money Loan Court Act and its procedures require comprehensive reform, alongside special recovery mechanisms specifically targeting wilful defaults.
Taken together, he said, banking stabilisation requires closing unviable institutions, transferring distressed assets off books and strengthening enforcement and recovery mechanisms.
Reaz said policy discussions in recent years have centred on survival rather than growth or diversification.
Financial products have not evolved in line with changing financing needs, he said, calling for expansion into technology-based finance and diversified start-up funding.
“Our financing needs have diversified. Banking products must reflect that.”
He warned that unless capital and bond markets are developed in parallel, pressure on banks for long-term financing will persist and full stability will remain elusive.
On fiscal management, he said the government’s existing debt portfolio requires restructuring.
Short-term non-concessional debt should be renegotiated and converted into concessional terms where possible, while new borrowing must be strictly prioritised.
“For the next two to three years, loans should be taken only for clearly defined purposes. Otherwise, the government should not borrow.”
Dependence on loans must be reduced, with the government mobilising funds from domestic and international capital markets rather than relying solely on sovereign borrowing.
“You cannot finance everything through loans, and you should not.”
He acknowledged that borrowing from institutions such as the International Monetary Fund and the World Bank is unavoidable up to a certain level, but argued that beyond that point, the government should raise equity or issue long-term bonds with maturities of 30 to 40 years.
Citing India’s asset offloading over the past decade to contain its fiscal deficit, he said Bangladesh could adopt similar mechanisms without selling strategic assets outright.
The Padma Bridge and Jamuna Bridge, he said, should not be sold outright, but 30 to 40 per cent of their value could be listed in capital markets through asset-based securitisation.
Revenue-generating public assets — including bridges, airports, stadiums, hospitals and power plants — could be pooled and partially offloaded without sacrificing state control.
About 46 per cent of electricity generation capacity remains state-owned, and public power plants carry significant value that can be securitised and partly offloaded, he said, adding that listings should not be confined to the domestic market.
“They can be structured and offloaded on exchanges such as London, Singapore or New York, so that dollar proceeds can be brought in.”
Such listings would reduce reliance on borrowing from the World Bank, Asian Development Bank or China. However, asset structuring, governance and reporting standards must meet global investor requirements.
“If you need $100, you may borrow $50. The remaining $50 can be raised by listing government assets in major markets.”
He added that developing the domestic capital market framework should be treated as a top priority, as the country needs to channel local savings into development alongside attracting global investors.
