Lower interest rates will help create a more business-friendly environment
It is good to hear that owners of private commercial banks have decided, under the direction of Prime Minister Sheikh Hasina, to reduce the interest rates on lending and deposits, down to 9% and 6% respectively.
This is wonderful news; lower interest rates will help create a more business-friendly environment, incentivize entrepreneurship, generate greater employment throughout the economy, and accelerate trade.
The economy of Bangladesh is at a crucial juncture -- we are racing ahead towards middle income status at breakneck speed, and our priority should be to create a better business climate and boost investment to meet these goals.
Ultimately, banks themselves will benefit from these single digit interest rates -- as the PM has commented, more people will be interested in working at banks.
We need more policies like this; it is incumbent upon the central bank to take pragmatic measures, like strengthening its monitoring activities, and maintaining transparency in the banking sector.
For a long time, our entrepreneurs have had to pay significantly more than what businesses should ideally be paying, and interest payments have been a major expense for them.
If we wish for businesses to maintain their cost leverages, this leverage being a cause against significantly raising the minimum wage of the RMG sector, and against companies spending more to maintain compliance with international standards, a high interest rate does not help.
With lower interest rates, we follow the good example set by some of our neighbours, and move towards the process of backing investments in the best way possible.