Frame monetary policy with functioning of market system

Monetary policy must be formulated with a proper understanding of the functioning of the market system in the economy or its impact on the economy will be profound, said Dr. Ahsan H. Mansur, Executive Director, Policy Research Institute, Bangladesh.

He came up with the observations while speaking as the key discussant at a roundtable discussion on monetary policy 2022-2023 on Sunday at ICAB Council Hall in the capital. The Institute of Chartered Accountants of Bangladesh (ICAB) organised the event.

Dr. Ahsan H. Mansur also said, “Currently, inflation and dollar and liquidity crises are the main challenges for the country. The dollar crisis in the country is evident. If it continues to deepens, the problem may take a more complex shape.”

He feels that there is a need to have visionary policies and guidelines to mitigate the pressure on the economy in this situation.

Mentioning India’s liberal interest rates, he said there was no challenge in their balance sheets, 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.”

Dr. Ahsan H. Mansur said unchanged policy interest rates in the country have compounded the problem. In global consideration, the investment rate of dollar and rupee should be adjusted. Money laundering is rampant in the country. The savings rate has come down to 5.5 per cent from 16.5-16.7 per cent earlier year. Good governance of the banking system is very important. There should be no inconsistency in monetary policy.

ICAB President Md. Moniruzzaman FCA said Bangladesh Bank has announced its monetary policy (MPS) with three objectives: controlling inflation, creating employments and increasing gross domestic product. The MPS projects inflation to be 5.6 per cent in FY22-23.

He said initiatives have also been taken to reduce the supply of money in the market to prevent inflation. In line with low inflation and high economic growth, the national budget pegged GDP growth at 7.5 per cent. He also said that the repo interest rate is considered as the policy rate has been increased.

Ferdaus Ara Begum, Chief Executive Officer (CEO), 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 said there is a big difference between information and policy execution in monetary policy. Given the consistent current economic situation, direction is not seen in this ‘exploitative’ monetary policy. But monetary policy needs to be formulated every three months so that the economy can be properly assessed.

Mahbub Ahmed, former Senior Secretary, Ministry of Finance, Mohammad Refayet Ullah Mirdha, President, The Economic Reporters’ Forum (ERF), and Zakir Hossain, Business Editor, Daily Samakal, also addressed the discussion.

ICAB council member and Past President Md. Humayun Kabir moderated the discussion while ICAB President Md. Moniruzzaman, FCA gave address of welcome.