Monetary policy not working: Mashiur Rahman
“Without addressing key issues like interest rates and money growth, achieving developing country status by 2031 is impossible,” the ex-DCCI president says
Mashiur Rahman, economic affairs adviser to the prime minister, has said the new monetary policy, which aims to tame inflation, is not working because of injecting high-powered money to facilitate loans.
During a seminar titled "Bi-annual Economic State and Future Outlook of Bangladesh Economy - Private Sector Perspective," he pointed out the weaknesses in the current monetary policy framework, announced by the Bangladesh Bank.
He said if banks could disburse loans to different sectors on the basis of priority, the government would not have to intervene to control inflation.
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He acknowledged the growing role of the private sector in Bangladesh's economy but cautioned against overreliance on policy support and subsidies.
He advocated for individual and collective action to address challenges, citing the global disruptions caused by the Ukraine war as an example.
Ashikur Rahman, senior economist of Policy Research Institute, said, "Bangladesh's private sector's contribution to GDP stands at 23%. However, achieving a trillion-dollar economy by 2031 seems challenging due to ongoing economic concerns."
He pointed to worrying macroeconomic indicators, including inflation, foreign reserves, and non-performing loans exceeding 22%.
He said simply printing more money to provide loan assistance is not a sustainable solution and emphasised the need for decisive and responsible policy decisions to address these challenges.
Shams Mahmud, former president of DCCI, raised concerns about Bangladesh's potential loss of GSP benefits upon graduating to developing country status in 2026.
He criticised the lack of government action on GSP Plus status and expressed concerns about the simultaneous increase in loan interest rates and monetary expansion by the Bangladesh Bank.
Shams Mahmud, also managing director of Shasha Denims Ltd, highlighted the negative impact of recent fuel price hikes and potential shortages on industrial operations and foreign investment.
He questioned the viability of achieving graduation as a developing country by 2031 without addressing some critical issues including rising loan interest rates, monetary expansion, fuel price hikes, and potential fuel shortages.
Md Habibur Rahman, chief economist of Bangladesh Bank, said despite crises like Covid-19 and the Ukraine war, Bangladesh's economy shows resilience. Import controls and export incentives balanced imports and exports in the last six months, even maintaining a current account surplus. The balance sheet of the central bank shrunk 2.03% in 2023 compared to 2022.
He mentioned new policies targeting financial stability and willful defaulters, expressing confidence that growth and inflation will be under control by June 2024.
