Bangladesh Bank to Review Monetary Policy Amid Criticism of Contractionary Approach

Bangladesh Bank is facing pressure to revise its monetary policy due to concerns that it is discouraging foreign direct investment and hindering local investment. Critics argue that the strict policy is failing to provide necessary financial support to the domestic industries, which is crucial for attracting foreign investment. The country's inflation rate is also expected to rise further due to the impact of increased oil prices.

Key Takeaways:

• Governor Dr Salehuddin Ahmed has stated that Bangladesh Bank will review the current monetary policy if it finds that the contractionary approach is discouraging foreign direct investment.
• Economists have criticized the government's tightfisted monetary policy, arguing that it is discouraging local investment and foreign direct investment.
• The symposium on "Monetary Policy of Bangladesh: Balancing Inflation and Growth" featured speakers such as Prof Wahiduddin Mahmud, Mir Nasir Hossain, and Dr Debapriya Bhattacharya.
• Prof Wahiduddin Mahmud called for the establishment of a committee to examine the role of FDI in Bangladesh and for the central bank to adjust oil prices to ensure balance in credit flows between the public and private sectors.
• Dr Debapriya Bhattacharya advocated for an approach that addresses the causes of inflation, rather than a contractionary monetary policy.
• Chairman of Shilpa Bank Prof Abu Ahmed blamed the inflated value of the US dollar for Bangladesh inflation, recommending that the Bank of Bangladesh control the exchange rate with the greenback.

Statistics:

• 24% growth in remittances in the first seven months of the current fiscal (Source: Prof Wahiduddin Mahmud)
• 12% rise in industrial growth in the first seven months of the current fiscal (Source: Prof Wahiduddin Mahmud)
• Bangladesh's inflation rate could increase further due to the impact of increased oil prices (Source: Prof MA Taslim)

Sources:

• Asia Pulse, Apr 11
• UNB, 11-04 1724