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Common currency in South Asia not possible now

FE Report | November 05, 2023 00:00:00

Introduction of a common currency in South Asia would not be possible at this moment, and before boosting regional trade and bringing down the trade imbalances among the countries.

Cross-border trade barriers, high bureaucratic sensitivity, complex visa procedure, people-to-people relation, and a lack of proper connectivity are the other hurdles on the way of introducing the common currency regime in the region.

Speakers at a two-day South Asia Economic Summit here on Saturday came up with the view, analysing the barriers to the prospects of macroeconomic cooperation in the region.

Economists, finance and monetary experts and researchers from Bangladesh, India, Pakistan, Nepal, Bhutan and Sri Lanka took part in the discussion titled "Macroeconomic Cooperation and the Possibility of Common Currency" at their 14th summit, which is scheduled to conclude today (Sunday).

Prof Sachin Chaturvedi, Director General of Research and Information for Developing Countries (RIS), India chaired the meeting.

Former World Bank Lead Economist in Bangladesh Dr Zahid Hussain, Senior Economic Advisor of the Ministry of Finance, Nepal Dr Posh Raj Pandey, Chief Economist of Bangladesh  Bank Dr Md Habibur Rahman, Associate Professor of RIS, India Dr Priyadarshi Das, Executive Director of Sustainable Development Policy (SDPI), Pakistan Dr Abid Qaiyum Suleri, and Executive Director of Policy Research Institute, Bangladesh Dr Ahsan H Mansur took part in the discussion among others.

Dr Zahid Hussain said although Bangladesh has opened up trade in Indian Rupee and Chinese Yuan, the initiatives are yet to yield desired outcome due mainly to a huge trade deficit with Bangladesh.

Since the South Asian nations have almost the same position with their big neighbour India, the barriers and difficulties should be addressed first before going for establishing a common currency, he said.

Dr Habibur Rahman of Bangladesh Bank said it is difficult to set up a common currency within the region as one country in the region dominates the trade and investments.

"Actually, we (SA countries) are not ready at this moment. They need to prepare with the help of their giant neighbour first and then it may be possible," he said.

Dr Abid Qaiyum Suleri of Pakistan suggested starting a "virtual common currency" at this moment to boost regional trade.

Dr Priyadarshi Das of India said service and trade liberalisation, expansion of fintech and development of cross-border infrastructure are imperative to go for the common currency regime.

Dr Ahsan H Mansur stressed the need for trade facilitation, common documentation, expansion of investments, increasing people-to-people contact, simplifying exchange rate and payment systems, higher amount of line of credit (LoC), currency swap, customs and tax policy harmonisation.

He also suggested the central governments and high-powered committees to sit together every three months to work out the way of overcoming the hurdles on the way of introducing the common currency.

Professor Chaturvedi said the dependency on USD is comparatively a costly regime for the cross-border trading among the SA nations. As the SA is the home of 24 per cent of the global population, it is a big market and there is a scope of enhancing intra-regional trade.

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