No further loans will be made from the reserve

• ERF advises against abuse of power in debt rescheduling
• Proposal to launch ‘Dollar Bond’ to deal with the crisis

The Economic Reporters Forum (ERF) has proposed the launch of ‘Dollar Bond’ to deal with the ongoing crisis. Besides, the organization has also suggested strict supervision so that no one can take advantage of loan rescheduling by abusing the power. On the other hand, no new loan will be given from the reserve (no new fund will be opened) said Bangladesh Bank Governor Abdur Rauf Talukder.

These discussions took place in the governor’s meeting with ERF, an organization of economic journalists on Monday. A delegation of ten members of the organization participated in discussions with the governor at the head office of Bangladesh Bank. It was part of the governor’s series of consultative meetings with economists on economic stability.

It is reported that currently the status of rescheduled loans is 2 lakh 13 thousand crores. Due to the special policy benefits given by the central bank, a mountain of loan rescheduling has been created in the banks. Hence it is advised to be strict to prevent misuse of power by ERF. At the end of the meeting, ERF President Refaytullah Mridha said, “We have given suggestions on how to make the economy more stable.” The governor expressed hope that the economy will soon return to a stable state. Baladesh Bank will not invest any more from the reserve at this moment. The governor said that there will be no new funds.

The ERF president also said, ‘I have urged that the restrictions imposed on the import of luxury goods should be properly monitored. Our colleagues have asked us to pay attention to the fact that money should not be laundered under the guise of import and export. We have made an important proposal to deal with the dollar crisis. We talked about introducing ‘dollar bonds’. Through this it will be easy to attract foreign investment.

Incidentally, banks last rescheduled defaulted loans worth Tk 63,719 crore in 2022. It has been approved by Bangladesh Bank, and the banks themselves have rescheduled. As a result, these loans were not identified as defaulters. However, at the end of last year, defaulted loans in the banking sector increased to Tk 1 lakh 20 thousand 649 crores. At the end of last June, this amount of defaulted loans exceeded 1 lakh 56 thousand 39 crores. If the rescheduled loans were marked as defaults, the non-performing loans in the banking sector would have exceeded 20 percent.

On October 23, Bangladesh Bank held a meeting with the research organization South Asian Network on Economic Modeling (SANEM) on the same issue. After the meeting, Sanem Research Director Dr. Saima Haque Bidisha said that a decision has been taken to give an incentive of up to two and a half percent in the purchase of remittances from the bank. It won’t work in the long run. Because as long as there is a difference between official and unofficial dollar rates, remitters will send dollars illegally. There is also a class who do business through hundi. Strict action should be taken to close this channel. As long as they are not controlled, foreign currencies will remain a threat. Also, we will not reap the full benefits of policy changes if we fail to restore good governance in the financial sector, including controlling defaulted loans.

Earlier on September 21, Bangladesh Bank held a meeting with former caretaker government advisor Professor Wahiduddin Mahmud. On that day, the prominent economist advised the government not to give loans by printing new money. Because such a trend can increase inflation. In addition, he advised to rein in ‘price expectations’ before reining in the market by fixing the prices of goods at this time of rising commodity prices. Besides, Wahiduddin Mahmud advised to give highest priority to inflation control than growth. He thinks, as a result of this, long-term investment is somewhat hindered, but there is nothing to worry about. Because commodity prices will rise—when expectations persist, commodity prices automatically rise. In such a situation it cannot be controlled by fixing the price of the product. Instead, it is necessary to adopt a coherent and credible policy to reduce price expectations and thereby signal the market. Also, apparently where monopolies develop, there is a need for increased oversight or regulation.

Economist Dr. Zahid Hossain and Dr. Governor also discussed with Ahsan H. Mansoor. They gave opinions on curbing inflation, making exchange rates and loan interest rates market-based. Dr. gave specific opinion to achieve these goals. Zahid. He presented the policy making strategy in detail through PowerPoint presentation. Bangladesh Bank Executive Director and Spokesperson Majbaul Haque said these suggestions will be reflected in the next monetary policy.

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