Making financial account positive big challenge for central bank
After 15 years, the country's financial account has become negative $3.58 billion in the current fiscal year thanks to increased foreign payments. Making the account positive again will be a big challenge for the central bank. It is possible only if we get more trade financing from foreign banks.
I applaud the policy that the central bank has announced to fight inflation. If it is executed properly, inflation can be tamed. After the next few months, it will be clear whether inflation will increase or decrease.
The Bangladesh Bank has not made exchange rates market-based; it kept the rates still fixed. If banks were forced to buy dollars from markets, instead of from the central bank, the market rates would have increased further.
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Short-term loan payments should be rolled over. We have to talk to our creditors and explain that we will return all their money. But if we don't get new foreign loans now, our financial account will not be positive.
We have to pay another $13-14 billion in the current year. It will be very difficult. So, we should take time for the payment.
The downgrade in rating by Moody's is not a geo-political problem at all, it is our economic problem. We have to solve our problems ourselves. If not, our loan rates [interest on borrowings] will increase, which, in turn, will make our forex market more turbulent.
External pressures cannot be controlled by reducing imports, without fixing a unified exchange rate. It is known to everyone how our economy has been paying the price for restrictions on imports. It is not sustainable by any means.
Furthermore, if exports are hindered due to disruption in gas and electricity supply, external pressure will increase further.
Ahsan H Mansur, Executive Director, Policy Research Institute of Bangladesh.
Disclaimer: The content was prepared by TBS correspondent based on an instant reaction over the phone following the announcement of the new monetary policy for the first half of fiscal 2023-24.
