Monetary policy should be made with understanding of market: Ahsan H Mansur

Monetary policy needs to be formulated with a proper understanding of how the market system functions in the economy. Otherwise, its impact on the economy will be profound, said Ahsan H Mansur, executive director of the Policy Research Institute.

As the chief guest of a roundtable on Monetary Policy 2022-23, organised by the Institute of Chartered Accountants of Bangladesh (ICAB) yesterday, Mansur highlighted India's liberal interest rates and said, there was no challenge in their balance sheets while inflation was relatively low.

"There needs to be policy coordination in our country. Despite disruptions in global commodity supply management, our country has not taken any measures of its own. The situation could be controlled to some extent by changing the interest rate regularly," he said at the event, at the ICAB Council Hall at the capital.

"Currently, inflation, dollar crisis and liquidity crisis are the main problems in the country. The dollar crisis in the country is evident, if it continues to increase, the problem may take a more complex shape," he pointed out, stressing there is a need for visionary policies and guidelines to mitigate the pressures on the economy.

''Unchanged policy interest rates in the country have compounded the problem. Considering the global situation, the investment rate of dollars and taka should be adjusted. Money laundering is rampant in the country. The savings rate has come down to 5.5%, from 16.5-16.7% the previous year. Good governance of the banking system is very important. There should be no inconsistency in monetary policy,'' he added.

ICAB President Md Moniruzzaman FCA said, "Initiatives have also been taken to reduce the supply of money in the market to prevent inflation. Deregulated interest rates would help control imports and help stabilise foreign exchange reserves."

Highlighting various aspects of monetary policy goals and objectives, ICAB's Chief Executive Officer Subhashish Basu said, "In order to reduce ongoing monetary policy in the country, create employment and increase gross domestic product, Bangladesh Bank formulated annual monetary policy announcement and increasing foreign exchange reserves is one of the challenges of monetary policy."

Ferdaus Ara Begum, CEO of Business Initiative Leading Development (BUILD) said, "Government investment in the country is more than private investment. The country's economy will advance if the public and private investment increases equally."

She also said, "There is a big difference between information and policy execution in monetary policy. The policy needs to be formulated every 3 months so that the economy can be properly assessed."

Mahbub Ahmed, former senior secretary of the finance ministry, said, "From the point of view of management, it is logical to formulate the monetary policy every six months. Currently, interest rates and inflation rates are lower than this, which is not normal for the economy. Attention should be paid to increasing domestic production."

He further said, ''Bangladesh Bank has indicated to reconsider the interest rate to deal with the liquidity crisis and investment rate, which looks positive for now. But we have to bring discipline in the banking sector and open credit in our country. All policies can be implemented only when revenue collection increases.''

Zakir Hossain, business editor of the Daily Samakal said, "Although the monetary policy mentioned that inflation will be controlled as prices reduced in the global market and there was a good harvest of Aman and Boro, we have not seen any such impact at the end of the season."

He also said that the policy cannot be effective if the interest rate is fixed.

"Of course, Bangladesh Bank has indicated that this fixed interest rate will be lifted gradually. However, Bangladesh Bank should focus on formulating universal monetary policy," he added.

Mohammad Refayet Ullah Mirdha, president of The Economic Reporters' Forum (ERF) said, "The issue of investment and employment should be taken seriously in the monetary policy. Because cottage industries, small and medium industries employ more people in the country. If this industry is not developed along with large industries, more employment will not be created in the country. In the ongoing economic crisis, businessmen in different countries have reduced their profits, while they are increasing the profits of our country. Inflation cannot be controlled by monetary policy alone."

Muhammad Abdul Mazid, former chairman of the National Board of Revenue; Jamaluddin Ahmed FCA, former president, ICAB also spoke at the event, moderated by ICAB Council member and former president Md Humayun Kabir FCA while ICAB President Md Moniruzzaman FCA gave the welcome address.