ICCB suggests interest rate cut to help foster investment

FE Team | Published: July 28, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

The commercial banks of the country have been suggested lowering interest rate to drive investment particularly in basic industries and infrastructure.
The International Chamber of Commerce, Bangladesh (ICCB) has put forwarded the suggestion in the editorial comment of its latest news bulletin for April-June 2014 quarter released Sunday, reports BSS.
Analysing the impact of credit inflow from both short and long-term foreign loans, the global chamber body came up with the conclusion that the credit flow from overseas at lower interest rate was a major cause of increasing liquidity surplus in local banks.
At the same time, the ICCB said the Bangladesh Bank has been pumping local currency into the banking system through buying US dollar for maintaining a stable exchange rate for the benefit of the exporters and expatriate Bangladeshis.
With the influx of additional local currency to the existing liquidity surplus, many banks have been lending to non-productive sector, which would eventually create inflationary pressure in the economy, the ICCB said.
Against this backdrop, the chamber-body recommended lowering interest rates by commercial banks to attract investors borrow more money from local banks for basic industries and infrastructure sectors.
The ICCB also cautioned the central bank about widening balance of payment (BoP), which would make it difficult for the central bank to keep the foreign exchange rate stable and reduce inflationary pressure.
This comment came only a day after the central bank announced its monetary policy statement (MPS) for the next six months with the primary objective of reining in inflation.
Referring to the slow inflow of foreign direct investment (FDI), the local body of the international business forum wondered whether shortage of physical infrastructure or silent erosion of confidence in the governance or both is responsible for less FDI. It underscored the importance of good governance for achieving higher growth, which is necessary for the graduation of the country to middle-income group by 2021.
The ICCB said private sector should be the engine of higher growth, but growth of private investment was stagnant in the last couple of years, mainly because of the political instability, lack of good governance and inadequate development of infrastructure.