Dr Zahid Hussain, a former lead economist at the World Bank, has suggested that the exchange rate should be driven by the market to stabilise the money market and prevent the decline of forex reserves.
The eminent economist made the suggestion at a meeting with Bangladesh Bank Governor Abdur Rouf Talukder held on Thursday at Motijheel in Dhaka.
Four deputy governors of the central bank--Kazi Sayedur Rahman, AKM Sajedur Rahman Khan, Abu Farah Md. Nasser and Nurun Nahar--were also present at the meeting.
Chief economist of Bangladesh Bank Habibur Rahman presented the economic challenges being faced by Bangladesh.
After the meeting, Zahid Hussain told journalists, “The central bank will have to move forward from the methods of the Association of Bankers Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers Association (BAFEA) to stabilise the USD market.”
These two organisations have been fixing the USD rate every month for remittance and export since September 2022. But the regulator should move forward from this action, he suggested.
He also added: “The central bank said it has no plan to forward the market-based exchange rate right now. But my suggestion was that it should be driven slowly. Bank’s lending interest rate should be market based as well.”
However, the central bank has to take necessary steps where the SMART method will be effective in the economy. The country's economy is facing three challenges--USD crisis, high inflation, and rising non-performing loans in the banking sector.
Dr. Zahid said, “In context of the central bank, these three factors are the key problems for the economy. The central bank thinks that these problems should be resolved immediately.”
“The central bank claims that the country did not receive more than $9 billion in exports. In the last fiscal year, the export outflows were $55 billion, but the country received $46 billion. So, the central bank is trying to boost export earnings as soon as possible. The regulator thinks that these export proceeds did not come for uncertainty. But the regulator thinks that these export earnings would come after the national polls and stabilising the USD market.”
