Call for breaking syndicates to control inflation

If the market syndicates are not stopped, the contractionary monetary policy alone cannot control the persistent inflation, economist Mustafa K Mujeri, director general of the Bangladesh Institute of Development Studies (BIDS), has said.

He made the observation during a meeting with Bangladesh Bank Governor Abdur Rouf Talukder on Wednesday. BIDS Director General Binayak Sen, and the deputy governors of the central bank were also present.

"The central bank has to break market syndicates with tight monetary policy to control inflation. In that case, the central bank will have to work jointly with other regulatory bodies," Mujeri, also the former chief economist of the Bangladesh Bank, told The Business Standard.

After the meeting, Mujeri said he had told the central bank governor that due to the bank's policy measures inflation has eased slightly in August, and it should be maintained.

He observed that the country's economic instability will increase in the next three months during elections. In that case, the central bank should make a short-term plan for the three months. At the same time, long-term plans should be made.

"He (governor) has agreed to our suggestion, and said that he will take initiatives gradually," added Mujeri.

Underscoring the need for changing the fiscal policy to control inflation, the economist said, "The government should reduce revenue expenditure. At the same time, steps should be taken to increase the revenue."

Mentioning that the central bank has been advised to go towards the dollar market rate, he stated that the country's reserves have been continuously decreasing for the past one year. Currently, there is a dollar crisis due to non-increasing remittance and export earnings.

Attributing the current problems in the banking sector to non-performing loans, impaired assets, and the board of directors of banks, Mujeri said, "Strong political commitment should be made to reduce defaulted loans, and the law should be properly implemented."

He added, "Banks' bad assets amount to around 25% of total loans. Currently, the total loan amount is Tk15.50 lakh crore. Banks have to make a time-based action plan to recover the bad assets. In case of failure in implementation, several weak banks may be consolidated."

The central bank has meanwhile met several economists to consult ahead of monetary policy formulation for the fiscal year 2023-24 (January-June).