No chance for a fully floating
FROM PAGE B1
He made these comments during a session titled “Policy Challenges in the Context of Global and Domestic Uncertainty” on the concluding day of the three-day “Annual BIDS Conference on Development” at the Lakeshore Hotel in Dhaka yesterday.
An elevated level of inflation, exchange rate volatility and higher non-performing loans are three major challenges facing the economy, according to the governor.
Rouf Talukder said he has discussed the present economic situation with many eminent economists, which helped him identified the problems and find solutions to them.
In response to economists’ call aimed at ensuring political commitments to solve these problems, the governor assured that the present government is playing a supportive role.
Ahsan H Mansur, executive director of the Policy Research Institute (PRI), described higher inflation and fixed exchange and interest rates as short-term challenges and lower revenue mobilisation as a medium-term problem.
The tax-to-GDP ratio is not adequate to transform Bangladesh into an upper-middle-income country, he said.
He said the financial sector is also being hurt in multiple ways whether it is the stock market, the bond market or the insurance market.
“All of the indicators are pointing that the financial sector is going down.”
The economist said after the election, political leaders should push ahead with the reform programme.
“If they think that the economy will be okay without doing anything, then it will collapse within two to three years.”
Bangladesh is currently implementing a programme under the International Monetary Fund (IMF). Mansur, a former official of the lender, termed the programme a timely one.
“However, the country does not need money. Rather, it needs the policy reforms that the IMF has prescribed. So, the country should follow the reforms for its own interest.”
According to the governor, inflation may fall to 8 percent in December.
“It will hopefully drop to 6 percent point-to-point basis by the end of June.”
Rouf Talukder said the central bank is now seeing a strong political commitment to reform the financial sector.
“As a result, bank and financial institutions related acts have been amended while habitual default loans were defined which will be helpful in reducing NPLs.”
Zaidi Sattar, chairman of the PRI, said the country has more than 1,609 non-RMG exporting products, so the government should put in place supportive policies for them.
“If it continues the protection years after years without any targets, local industries will not be competitive and export diversification will be on paper alone.”
Selim Raihan, executive director of the South Asian Network on Economic Modeling, said no endeavour was seen in reducing the NPLs, so it is hurting the sector badly.
“The legal system is also not conducive to curbing the NPLs. We want to see a strong political will and a roadmap to bring it down.”
Tapan Kanti Ghosh, senior commerce secretary, said whenever there is a shortage of goods, hoarders try to make quick bucks.