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Make BB independent to better economy

Ficci urges govt

STAR BUSINESS REPORT
Foreign investors have urged the government to make Bangladesh Bank an independent body, free from any interference of the finance ministry.
The central bank should be an independent body and free from the finance ministry influence, said Mahbub Jamil, president of Foreign Investors' Chamber of Commerce and Industry (Ficci) at the monthly luncheon meeting of the chamber in Dhaka yesterday.
This will help the central bank take decision independently in regulating the country's financial sector. Such a move will also enable it to freely pursue the ongoing financial reform policies as well as devise new ones for betterment of the national economy, he added.
Besides, the position of the central bank's governor should be a constitutional one like that of the auditor and comptroller general, Jamil noted.
Bangladesh Bank Governor Dr Salehuddin Ahmed attended the meeting as guest of honour.
Responding to the FICCI chief, the governor said making the central bank independent depends on the government. "But finance ministry does not interfere in the activities of the central bank."
"The financial policy, which we are pursuing is fully consistent with the global economic trends. But the modest world growth scenario faced with the pressure of oil price hike has put our economy, like the others in our region, into a new challenge."
"The BB has liberalised interest rate and the banks themselves will now determine it, not the BB," the governor said hoping that the banks will lower the normal rates as soon as their liquidity positions improve.
There is no harm if the savers get more money from their deposits. But the banks should not increase their lending rates, he felt. "Luckily, interest rates of lending have increased slightly in recent times."
Low inflation, stability in real exchange rate and real interest rate are everybody's interest, Ahmed observed.
As for exports, performances of knitwear, textiles, chemical products, agricultural commodities, ceramic products, tea and handicrafts are still notable despite MFA phaseout, he noted.
However, rapid import growth and slowdown in export growth created some temporary pressure on foreign exchange market, the BB governor mentioned. "But we are noticing some signs of improvement."
Cash Reserve Requirement (CRR) was slightly raised to rein monetary expansion back. Repo market rate is also rising, he said adding that the interest rates have already risen in some neighbouring countries.
Mahbub Jamil said all kinds of financial institutions including insurance and leasing operations should be brought under the central banks umbrella as in vogue in many countries irrespective of their development status.
In order to cater to the needs of financial institutions and business communities, there must be a central depository in the bank for various notifications, circulars and SROs (State Regulatory Order) issued by its different divisions from time to time, the Ficci president said. "It becomes very difficult at times to collect old copies."
Presently, said Jamil, the central bank is standing in the way of the employees of international companies in availing share options offered to them by their parent companies abroad. In this process, the government as well as the employees of such companies is deprived of earning foreign currency which would otherwise come to the country in the form of dividends, sale proceeds from shares etc.
This facility is available in most of the countries including neighbouring India, Pakistan and Sri Lanka, he mentioned.