A half-yearly monetary policy statement (MPS) comes today amid challenges of containing inflation and volatility on the forex market and ensuring good governance in banking.
Economists see much of the remedy for economic ills, especially market waywardness, in allowing full float of rates on the money market.
The Bangladesh Bank (BB) is set to unveil the MPS for six months from January to June 2024 Wednesday at the BB headquarters in Dhaka, sources said Tuesday.
People familiar with the development told the FE that they had already finished all arrangements for placing the statement on the country's monetary policy-obviously coming while a newly formed government is setting sail with multidimensional challenges particularly on the economic front.
"We are ready to unveil the MPS on Wednesday afternoon at the BB HQs," Dr Md Habibur Rahman, chief economist of the Bangladesh Bank, told the FE.
He said the MPS would try to address many challenges facing the economy.
"Our focus is to contain inflation, volatile forex market and ensure good governance in the banking industry," Dr Rahman said.
Economists familiar with the matter told the FE that inflation should be given the highest priority as the limited-income groups are suffering.
"The highest priority should be containing inflation," says Dr M Masrur Reaz, chairman and CEO of Policy Exchange of Bangladesh.
"There is need for full liberation of the interest regimes."
Mentioning that the central bank has been providing cash support to some banks, he says there is need for ensuring good governance in the banking industry.
Dr Masrur also feels the need for synchronizing between the fiscal and monetary policies to tame the inflation.
Dr Zahid Hussain, an independent economist of Bangladesh, has stressed the urgency of continuing with such contractionary MPS to contain the inflation that pushes up prices.
"We need stronger monetary instruments to curb the inflation," he told the FE correspondent.
Dr Hussain recalls that the last monetary policy mentioned unified exchange-and market-driven single-exchange-rate regime but there was no sign of getting to the goal.
"Once the central bank fails to implement what it promised in the MPS, it will lose its credibility," he says.
The former World Bank economist also says Bangladesh is committed to switching to fully market-based interest rate from 2026, and for this reason, there is now a need for plans on how to phase out from the existing SMART benchmark.
However, the monetary target for public-sector credits up to December 2023 was 43 per cent. But, at the end of November, it reached 21.55 per cent.
The target for private-sector credits was 10.9 per cent for up to December 2023. But, at the end of November, was recorded at 9.9 per cent.
The broad money target for December 2023 was 9.5 per cent, and at the end of November, it was 8.65 per cent.
The primary objective of the last monetary policy statement was containing inflation, which failed, as no improvements in the price surges were tangible, analysts say.
The inflation rate was high at 9.41 per cent in December which much higher than the revised target of 7.5 per cent for whole fiscal year (FY 2024).
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