“Bangladesh, fortunately, is in a different situation. You don’t have high external debt. With the level of coverage of foreign reserves, even if it has declined, you still have a number of months there,” Vinals said.
“Then I see a private sector in spite of these recent turbulences is very determined to succeed and has a lot of vitality. Frankly speaking, I think that Bangladesh has the potential over the medium term to become one of the stars in Asia,” he said.
Bangladesh’s economic landscape has shifted to some extent since Viñals’s previous visit to Bangladesh in 2018, a year without a pandemic and the effects of the Russia-Ukraine war. The country’s GDP growth sharply came down to 3.45 percent in the 2019-20 fiscal year from 7.88 percent a year earlier. Then the growth accelerated over the next two years, reaching 7.25 percent in the 2021-22 fiscal year.
Viñals predicts the growth rate of Bangladesh over the next 5-7 years could be 7.5 percent or “even slightly higher”, a forecast consistent with the government’s projection. But for that to happen, things need to be done to keep improving the ease of doing business, strengthening economic governance and institutions and the rule of law.
“Governance is something that is an issue in many countries across the board. For instance, in the financial system, it’s important to make sure that there is legal predictability. Legal stability is required in order to make sure that both domestic and foreign investments come in,” he said.
Bangladesh has a “very significant opportunity” to continue benefiting and benefit even more from the international diversification of global supply chains, thanks to cost advantages, location advantages and the US-China trade tensions and broader geopolitical issues in the region, he said. “I think that Bangladesh, if it can play its cards wisely, can benefit enormously.”
The country ought to continue to diversify the economy and export sources and build important infrastructure, not only physical, but also digital. And in terms of the building of human capital, Bangladesh must address the short-term challenges of macroeconomic stabilisation, according to Viñals.
Asked to specify an area of the economy where governance is an issue that needs to be fixed, Viñals said: “I don’t want to go into specifics of the Bangladesh economy. I would just make the remark that we know from the experience of many other markets and countries that one of the preconditions for growth to be sustained is to make sure that the rule of law is strong, that institutions are strong across the board — both public institutions and also the institutions in the private sector, including the governance of important financial institutions.”
Viñals seemed hesitant to speak on Bangladesh’s banking system, which grabbed the spotlight recently due to reports of suspicious lending and he diverted a question to Standard Chartered Bank’s man in Dhaka — Naser Ezaz Bijoy.
Nevertheless, Viñals touched upon the broader issue of governance. “There are always issues in all banking systems. After you have a period of some challenges, some of those challenges are reflected in the accounts and in the balance sheets of banks. So things can be done always to improve asset quality, to clean up the balance sheets, to enhance governance, to improve the capitalisation of banks. Again, it is not for me to tell what needs to be done. What I can tell you is what Standard Chartered is doing. And what we’re doing is to continue to invest in Bangladesh.”