High policy rates may hamper investment
FROM PAGE B1
“When interest rates rise, the flow of loans decreases,” he said.
Ahmed said the interim government has some other tools at hand to reduce inflation and it should utilise them.
“Food wastage is one of the biggest causes of inflation in the country. If wastage at the production stage is reduced, inflation will be reduced and import demand will also be reduced,” he added.
Ahmed also said the biggest challenges for the interim government were to attain microeconomic stability and restore law and order.
“We’re still having gas and electrical troubles. If we cannot overcome the challenges of labour unrest and energy shortages, it will have a significant impact on exports,” he added.
However, Md Salim Al Mamun, director for research of Bangladesh Bank’s Chief Economist Unit, urged the business community to be patient amid the current economic situation.
“Inflation is not under control yet, so until it declines, the policy rate will continue to rise, as stated in the central bank’s monetary policy,” he said.
Recently, the interim government raised the policy rate from 9 percent to 9.5 percent.
He emphasised that stabilising inflation and the macroeconomic environment were currently more important than focusing on economic growth.
“Taming inflation should be the topmost priority now as it directly hits the low-income group,” he said.
“In this situation, if we have to compromise, such as if gross domestic product (GDP) growth comes to stand at nearly 5 percent, it would be treated as a success for the government,” he added.
Mamun expressed hope for inflation to return to a manageable level within eight to 10 months, on condition the government’s measures are properly implemented.
Regarding default loans, the DCCI president said it was an issue involving 10 to 12 weak banks, not the entire banking sector.
“During this reform period, we have to ensure that these reforms do not negatively impact the entire banking sector,” he said.
The DCCI president also recommended maintaining the flow of bank loans for industry and cottage, micro, small and medium enterprises at a normal level.
Khan Ahmed Sayeed Murshid, former director general of the Bangladesh Institute of Development Studies, said everything happens so fast in this world that it leaves no alternative but to respond quickly.
“With economic challenges, a few non-economic challenges that are also very crucial need to be addressed soon,” he added.
Murshid underscored the importance of broad-based inclusive growth ensuring fundamental food, power and energy security alongside education and skills development.
To tap into future opportunities, he hinted that AI based technology would have a major impact on the global economy.
Mohammad Abu Eusuf, a professor of development studies at the University of Dhaka, urged for better coordination among the monetary and fiscal policies and market management to curb inflation.