Opportunities are there, so are challenges

The global economy seems to remain fragile in 2024 though inflationary pressure might come down despite the continuation of the wars in Europe and the Middle East, said Kanti Kumar Saha, chief executive officer of Alliance Finance PLC.

Major central banks may not raise interest rates further, as predicted by most of the global think-tanks.

Bangladesh will not be an exception, he said.

"Major challenges will be how quickly businesses come out of the import restrictions, the higher rate of inflation, the rate of interest, and higher non-performing loans."

He said despite all these challenges, there will be more opportunities in the new year.

"But much will depend on the political stability and quick economic reforms, including faster decisions of money loan courts as well as concluding on the fate of weaker institutions."

According to Saha, the financial sector and the capital market should come out from the restrictive measures to a market-driven exchange rate and interest regime. There should not be any floor price in the stock market and stern action against manipulators should be ensured.

"Listing of good companies is a must."

Both state and private businesses should come to the capital market to raise funds, instead of continuing their reliance on banks for project financing.

Saha said the National Board of Revenue can think of a few incentive structures to attract large and multinational companies. Biggies will not come for listing without attractive tax incentives.

Taking advantage of digital solutions and keeping the number of branch networks at a limited scale will reduce operating costs and increase profitability. Innovations will be the key to navigating the challenging time.

In 2023, Saha says, the biggest takeaway was adopting the Treasury bill-based interest rate regime at the time of rising inflation, paving the way for deposit growths in the financial sector and the depreciation of the taka although it was not fully market-driven.

The New Finance Act 2023 and the amendment to the Bank Companies Act, and last but not least, the PCA (Prompt Corrective Action) framework for banks seem to be a very good addition to address long pending problems of the financial sector.

He says both exports and imports will increase in 2024 as the wage issue in the export sector has been addressed while inflation is lowering in the country's main export destinations.

"Import restrictions should go on the back of improvements in the balance of payments situation."

Inflation will be high but it will not increase as the oil price will remain low as predicted by Goldman Sachs. Demand for loans will go up if there are no restrictions on imports. These will impact the profitability of banks positively.

Under the new acts and PCA, banks and non-bank financial institutions should focus on consolidation to reduce NPLs, improve governance, better risk management, and build up knowledge-based human resources, added Saha.