Trade bodies for lifting interest rate cap to tame inflation

Business leaders on Sunday underscored the need for ensuring a flexible interest rate regime temporarily to reduce inflationary pressure and stabilise foreign exchange reserves.

They made the remarks at the seminar titled, ‘Bi-annual economic state and future outlook of Bangladesh’ organised by the Dhaka Chamber of Commerce and Industry (DCCI) at its auditorium in the city.

DCCI President Rizwan Rahman, while presenting a keynote paper, highlighted the energy, inflation, food security, logistics and financial sector. He said the trade deficit stood at $40.15 billion in FY 2022.

“The government should rationalise the cost and ease of doing business. Policies that discriminate between local and foreign investors should be removed. The government should introduce a national one-stop service,” he added.

Rizwan suggested expediting bilateral and multilateral Comprehensive Economic Partnership Agreements (CEPA) with selective countries and revision of import tariff structure.

Monetary and Fiscal policies should have a nexus for coordinated economic development.

“Recently liquid fuel price is hiked nearly by 50 per cent and the natural gas price raised by 22.78 per cent whereas Inflation was recorded 7.48 per cent in July. Moreover, disruption in global trade affected essential food supply and the reserve crisis forced to increase external borrowing. However, from January to June in FY22, our export was $27.39 billion but the import was $48.16 billion at the same period that shows positive growth,” he informed.

During the same period, inflation was 7.56 per cent, private sector credit growth was 13.66 per cent, remittance was $10.79 billion and the reserve was $41.8 billion, he said.

BKMEA Executive President Mohammad Hatem said, “The government should borrow at least five billion dollars from our reserve to continue gas supply properly if it is needed. I think we can repay the amount within the next six months through our export earnings.”

State Minister for Planning Dr Shamsul Alam attended the seminar as the chief guest. “We can consider increasing interest cap somewhat to control inflation temporarily. The government is worried about inflation but the country is going forward amid the global crisis. However, we are helping the poor by supplying essential commodities through the TCB,” said the minister.

Mentioning Bangladesh has a positive image in foreign loan repayment, Shamsul Alam said the country should take a loan from foreign sources as soon as possible to ease pressure on the dollar, and support domestic business here.

“Taking a loan is not so negative. The USA, Japan and Singapore also took a lot of loans compared to their economy. Bangladesh’s economy now stands at $665 billion,” he informed.

“Our current crisis won’t be long. It’s temporary. We are going ahead and overcoming all challenges. A group of people is creating panic as the election is knocking on the door. However, last year, Bangladesh sent about one million workers abroad and its positive impact on remittance inflow will be visible soon,” he added.

“We are prioritising manufacturing sector which growth was 23 per cent in the last fiscal year. You (manufacturers) must improve product quality to catch the international market. Besides, the private sector should come forward to create more skilled manpower,” he said.

Former FBCCI President Md Shafiul Islam Mohiuddin sought policy support from the government so that the vibrant private sector of Bangladesh can contribute more to the economy.

Chief Economist of Bangladesh Bank Dr Habibur Rahman said the central bank is always looking into the best-balanced policy guidelines to control the normal money circulation and market.

“We are also thinking options for currency swap with a few countries like India and China,” he said.