EDITORIAL
Political unrest saps investors' confidence
Banks awash with liquidity
THE news across the board is bad. Continued political bickering, frequent country-wide shutdowns and violence are taking their toll on all business activities. Investor confidence is at an all time low and this is reflected in the downturn of loan disbursement in the banking sector. According to newspaper reports, some of the biggest lenders like state-owned Pubali Bank Ltd. is sitting on Tk2,000cr. and private sector bank Mutual Trust bank with Tk1,000cr that have been sanctioned for loans.
This is ironic, especially since the banking sector as a whole was facing a serious liquidity crunch two years ago. The situation is now effectively reversed with loan-deposit ratio down to about 70 per cent, which in essence means that there is significant lack of demand for finance. As business winds down, so does government revenue generation from taxation. This sustained lack of demand for loans—whether for industrial, commercial or consumer purposes will remain until the political scenario undergoes some fundamental changes.
In the event that the two major contending political blocs in the country fail to reach a consensus to break the current gridlock, the bourses will continue their bearish run, flight of capital will remain unchecked and new investments will not take place. Businesses will keep getting squeezed. This will inevitably lead to slashing of workforces, both blue and white collar. With so many indicators turning red across the economic barometer, has the time not arrived for direct talks to end the political gridlock?
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