Exchange rate volatility, inflation to ease in 2/3 months

Bangladesh Bank Governor Abdur Rouf Talukder on Saturday expressed his optimism that forex-market volatility and inflationary pressure on the economy would ease in the next two to three months.
The central bank would take measures to allow the market to determine the exchange rate of the greenback, he added.
Mr Talukder was talking to the newsmen after inaugurating the two-day 'Ninth Annual Banking Conference-2022', hosted by the Bangladesh Institute of Bank Management (BIBM) on its premises.

He said dollar crisis is a complicated issue and people need to be patient.
"The inflation that we are facing right now is import-induced. Dollar prices depend on short-term inflow, outflow, remittance, export and import. Prices remain stable when there's a balance between all these."
When his attention was drawn to the windfall profits made by several banks banking on the market volatility, the BB governor denied making any comment on the issue which is under investigation.
Speaking as the chief guest at the conference, Mr Talukder earlier on the day said the Russia-Ukraine war came as another trouble for Bangladesh soon after it successfully tackled the Covid-19 fallout riding on prudent policy supports.
The war has drastically disrupted the supply chain, which, he said, also hit the economy that largely depends on imported fuel oils, fertiliser and some food items.
"Our imports have gone up manifold while exports and remittance didn't cover up the import expenditure. As a result, we are feeling the pressure in both exchange and inflation rates," he said.
Under the circumstances, Mr Talukder said, many had suggested lifting the lending rate cap, but it would have increased the cost of capital for the entrepreneurs.
The BB chief said that the government has already adopted some supply-side interventions to contain the aggregate domestic demand.
"We still believe these initiatives from the government and the central bank will help control the situation or bring it to a desirable level in the next two to three months."
Banking landscape keeps changing continuously and the industry is passing through emerging challenges in a critical environment attributed by Covid-19 devastations and global macroeconomic instability due in part to supply-chain disruptions, he said.
"Encouraging sustainable banking to promote sustainable economic growth is crucial in this circumstance where technology adoption is a necessity. The government has been very active in creating an appropriate atmosphere for handling environmental and social risks in business and economic activities."
"Commercial banks must earn profits… but they shouldn't forget that the country is above all. We need to support the country when it is in trouble. In business, the morality and ethical standards have to be maintained in making profits," he continues.
About the roles of banks' sponsored directors and executives, Mr Talukder said he asked boards of directors not to do the job meant for the management, as the latter should do their business in compliance with the rules set by the central bank.
The inauguration was followed by the plenary session styled 'Macro-financial environment and financial sector' where speakers emphasise strengthening the capital market through attracting large corporate houses to lessen load on commercial banks that basically deal with short-term deposits.
Terming a large volume of NPLs (non-performing loans) as burden for banks, they also suggest ensuring punitive legal action against large defaulters.
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank Limited, said the market capitalisation-GDP ratio is extremely low here. It is about 15 per cent in a $400-billion economy.
"There are 300-plus companies in the capital market, mostly small ones. Why are the large companies not coming? We've to find out the root cause and bring them in," he suggests.
"If it happens, companies will use capital market more for long-term financing instead of coming to commercial banks. If we can make the share market more active, it will boost our economic growth."
Mr Rahman said the bank financing accelerated the economic growth.
It also brought in a significant volume of NPLs due to various factors.
"I think exemplary punishment to some of the leading defaulters should be meted out," he went on to say.
Dean of Academic Affairs of Monash University Programmes at Universal College Bangladesh Dr Sarwar Uddin Ahmed said the time has come to control the money supply by raising the lending rate.
"We should do something about the interest rate if we really want to control inflation," he added.
For a sustainable banking system, he suggested continuation of green banking activities. "We should be financing more so that we can have green energy."
Md. Nehal Ahmed, director of the Dhaka School of Bank Management of the BIBM, says 10 banks have less than 10-per cent capital-adequacy ratio, which is a matter of serious concern.
"The regulator should think about this issue."
Chairing the session, Institute of Microfinance executive director Dr Mustafa K Mujeri says the developmental role of the banking sector will be the key to attainting the country's upper-income status.
"Therefore, we must look at the health of the banking sector and place policies which can deepen the role of the financial sector in Bangladesh's development."
BIBM associate professor Md Mosharref Hossain, among others, also spoke at the event.
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