As far as I know, this blog is the only place that publicly criticised the appointment of Dr Atiur Rahman as the Governor of Bangladesh. How has he performed in the last few years as the central banker? Given the share market bubble and crash and several controversial developments — scams, ‘political’ banks, l’affaire Yunus – in the banking sector, it’s reasonably straighforward that he has failed in his task of maintaining financial stability. On the other hand, Bangladeshi economy has shown remarkable resilience — growth has been steady around the 6% mark despite shocks such as the share market crash or the fiscal strains related to the rental power plants. Inflation has been much higher than the Bank’s target picked up during most of the governor’s term, but has subsided recently to be within the Bank’s target (see the chart of inflation through the year, actual vs Bangladesh Bank target – source: CEIC Asia and BB).
So, on balance, a mixed record for the Governor so far. And over the next few months, his record can swing either way. Unfortunately, the latest monetary policy statement suggests that there is a high risk that my fears about him will yet come true.
Many years ago, when Dr QIB Chowdhury lived in Bangabhaban and Tarique Rahman was not widely reviled, Shafiq Rehman hosted a TV programme (I forget in which channel) where politicians from across the aisle participated. One item involved asking BNP leaders who they thought was a successful minister in the previous Awami League government. Matia Chowdhury – the agriculture minister in that government — was chosen pretty unanimously. Ms Chowhdury is agriculture minister in the current government too. Interestingly, according to the latest Prothom Alo – ORG Quest poll, she is not viewed as a success any more. Over two-fifths surveyed believe under her watch, farmers are not doing well. Over half consider her to be a failure as a minister.
I was intrigued by the poll results. Is there any way to check her performance in the data? Well, as with garments sector, one good way to check how a sector is doing is to look at its productivity. When productivity rises, profits and wages can both rise. The standard measure of productivity in agriculture sector is farm yield (output per unit of land). The thin green and gold lines in this chart shows annual growth in yield (kg per hectare) in rice and all crops respectively. As you can see, these annual growth series are very volatile. This is because there is a lot of variation in agricultural output on an annual basis. To make any inference, one needs to smooth the data. There are more fancy techniques, but for a blog post annual average over the previous five years should suffice — these are the thicker lines (green for rice, gold for all crops).
Suppose Matia Chowdhury took some concrete steps to give lasting benefit the farm sector in, say, 1996-97. How would that show up in the data? If as a result of her actions, productivity growth accelerated for a while, then we would expect to see the thick lines step up towards the end of the 1990s, and stay elevated into the 2000s. And in fact, that’s exactly what we see. Farm yields grew pretty steadily in the 1970s and 1980s. But by the mid-1990s, farm yields basically stopped growing. And then yield growth rebounded strongly in the late 1990s before moderating to historical pace in more recent years.