To stabilise the exchange rate, Bangladesh needs to diversify its export basket instead of adjusting bank interest rates, said Salman F Rahman.
“Bangladesh is currently going through economic shocks like all other countries around the world, caused by external forces such as the Russia-Ukraine war and its impact on the global supply and demand. The most immediate effect of this is visible in the exchange rate,” Salman F Rahman, the prime minister's private industry and investment advisor said on Sunday.
He was speaking as the chief guest at a luncheon organized by the Bangladesh-Malaysia Chamber of Commerce and Industry (BMCCI) titled ‘Anatomy of a Macroeconomic Crisis.’
Salman F Rahman further stated that the austerity measures initiated by the government and the central bank to rein in a bullish trend of imports since the beginning of the second half of the last fiscal year are paying dividends as import costs have shrunk to $6 billion from over $8 billion a month.
“Our imports used to be $8 billion a month, which came down to $7 billion last month and $6 billion this month. I believe our issues will be resolved pretty soon, and the bank interest rates do not need to be tampered with for that,” he said.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) also took a stand against the demand to remove the cap of the existing 9% loan rate and deposit rate of 6%.
“If the cap is lifted, interest rates will rise to 16-17%, which will hamper private sector investment," said FBCCI President Md Jashim Uddin, speaking as a special guest at the meeting.
The FBCCI president stated this, opposing the Executive Director of Policy Research Institute (PRI) and Chairman of Brac Bank Dr Ahsan H Mansur’s statement during the event, who had urged to lift the existing cap on bank deposit interest rates to stabilise the exchange rate.
While presenting the keynote paper at the meeting, Dr Selim Raihan, executive director at South Asian Network on Economic Modelling (Sanem) also suggested raising deposit and interest rates as a rational move.
He also said: “We shouldn’t call the situation a crisis, rather we say it is a challenge. Yes, there is a pressure on our foreign reserves but we need not be compared with other countries like Sri Lanka and Pakistan as our economic base is more stable and stronger than any other index compared to the world.”
The private industry and investment advisor also pointed out that the central bank has already taken measures to reduce imports at the right time. However, the export basket needs to be diversified further as the country solely relies on the RMG sector too much in regard to exports, which is not sustainable.
The policy that makes the RMG sector successful, needs to be replicated for other sectors as well. “Although we now have a better situation to attract the FDI, there is room for improvement,” he said.
BMCCI President Syed Almas Kabir presided over the program where Malaysian High Commissioner to Bangladesh Haznah Md Hashim was present as the guest of honour.
