ICAB for acceptable monetary policy

The Eighth Five-Year Plan highly emphasized investment but it was not reflected in the monetary policy, said the experts at a roundtable discussion.

The Institute of Chartered Accountants of Bangladesh (ICAB) on Thursday organized the discussion titled ‘Monetary Policy 2022-23 in the Context of Ongoing Economy’ at CA building.

They said the repo rate known as the central bank’s policy interest rate has been raised by 0.50 per cent to 5.5 per cent.

Consequently, banks will now have to pay higher interest rate to borrow money from the central bank.

This will affect the bank loan. Entrepreneurs will lose interest in investing in business with a loan from a bank. Although the Eighth Five-Year Plan emphasized investment it was not reflected in the monetary policy.

While addressing the session ICAB President Md Shahadat Hossain said like fiscal policy, the main purpose of monetary policy is to ensure full employment and price stability and help to achieve economic growth.

It is important to formulate an acceptable monetary policy to accelerate and encourage economic growth in both industry and agriculture in addition to full employment.

He said, since the beginning of this year, the prices of almost all the commodities in the market had gone up. As a result, the inflation rate in May stood at 5.99 per cent. It will be the main challenge in the FY 2022-23 to keep inflation stable.

There is no alternative to tightening supervision to reduce commodity prices and increase production of alternative products to control inflation.

It may not be possible for the central bank to go alone. It was important to take such steps in coordination with various government ministries.

Dr Muhammad Abdul Mazid, former chairman of NBR said it is challenging to implement monetary policy considering worldwide crises. Keeping the inflation stable should be prioritised and in this regard access to information is important.

Dr Selim Raihan, Executive Director, South Asian Network on Economic Modelling (SANEM), said banking sector is the heart of the economy of the country.

But governance has been a big weakness in the sector for long time. It is needed to take more initiative considering the current situation and create more examples.

“We have many problems in private sector investment credit. We have to wait for another one year to boost private sector investment.”

He suggested reviewing monitory policy like interest rate, reforming banking sector, suspending tax on essential items and widening social safety programme. The global inflation will not go soon and the government should take effective measures to face the challenges, he added.

While addressing the session as chief guest Dr Shamsul Alam, State Minister for the Ministry of Planning, said the government is working effectively on fiscal and monetary policy. Bangladesh is growing facing many challenges like Covid-19 and Russia-Ukrainian War.

He also recommended announcement of monetary policy within six months and ensuring participatory policy statement, he added.