BB starts taking opinions

The Bangladesh Bank has started taking opinions from internal and external stakeholders to formulate a proper monetary policy amid a set of challenges in the country’s economy.

Its Monetary Policy department on Monday arranged a meeting attended by high officials and took their opinions to formulate the FY23 monetary policy.

Governor of the Bangladesh Bank Fazle Kabir presided over the meeting while almost all directors and executive directors of all departments were present.

Habibur Rahman, chief economist of the central bank, presented the keynote discussing the current situation of the economy.

The Monetary Policy Department is now very busy completing all the tasks as this will be the last monetary policy during Fazle Kabir’s tenure, which will end on July 3, as the governor. It is set to hold a meeting with economists on Thursday to take their opinions.

At least three high officials of the central bank told The Business Post most of the meeting attendees on Monday agreed to lift the interest rate cap on lending as this is a big obstacle to the formulation of an appropriate monetary policy during this challenging period.

The banking sector was facing huge liquidity pressure due to the forex market volatility, said the central bank officials, adding banks would be discouraged to lend if the interest rate limit was not withdrawn.

They also said the economy was facing various challenges due mainly to the Russia-Ukraine war while tackling the skyrocketing inflation was one of the major challenges in the coming days.

The Bangladesh Bank chief economist told The Business Post they were preparing the monetary policy cautiously as this was a challenging time.

He said attaining the gross domestic product (GDP) growth target set by the government and taming the soaring inflation were the main focus of the new monetary policy.

During the upcoming 2022-23 financial year, the government has targeted to achieve a 7.5 per cent GDP growth while keeping the average inflation rate at 5.6 per cent.

The Bangladesh Bureau of Statistics data shows inflation stood at 6.29 per cent in April this year.

Ahsan H Mansur, executive director of Policy Research Institute, told The Business Post big changes were needed in the FY23 monetary policy during this challenging time.

He said the monetary policy is now ineffective due to the interest rate cap on lending.

“If the central bank wants to tackle the current challenges, the interest rate cap should be lifted,” he added.

The banking sector is facing liquidity shortages due to growing import payments. To tackle inflationary pressure and restore stability in the foreign exchange market, the central bank on May 29 raised the repo rate by 25 basis points to 5 per cent, the first hike since January 5, 2012.