Wednesday | 11 December 2024 | Reg No- 06
বাংলা
   
Wednesday | 11 December 2024 | Epaper
BREAKING: ● ADB approves $600m for Bangladesh to strengthen economic management      ● Govt bans foreign travel of officials      ● Labour unrest in Ashulia demanding 15pc increment       ● US wants Bangladesh, India to resolve differences peacefully      ● 72pc accounts spreading anti-Bangladesh propaganda based in India: Rumor Scanner      ● If India doesn't return Sheikh Hasina, her trial will continue: Toby Cadman       ● Bangladesh elected Vice President of UN Human Rights Council for 2025       

Banks In The Aftermath of Regime Change

Liquidity crisis continues to be big challenge: NBL Chairman

Published : Friday, 15 November, 2024 at 12:00 AM  Count : 466
Shamsul Huda
The contractionary monetary policy of Bangladesh Bank aimed at curbing inflation is causing escalating challenges in maintaining liquidity and private sector investments amid high inflation. 

Abdul Awal Mintoo, Chairman of National Bank Limited (NBL), in a recent exclusive interview with The Daily Observer said it and warned that the situation could further worsen if immediate remedial steps not being taken  

The most pressing issue raised by Mintoo was the severe liquidity crunch faced by the banking sector due to the central bank's tight control over money supply. 

He explained while Bangladesh Bank's policy is designed to tackle inflation, its delayed actions in providing liquidity support to affected banks are exacerbating the crisis.

For months, Bangladesh Bank has been tightening money supply to control inflation. But the delay in providing liquidity support to banks is making things worse," said Mintoo. 

He emphasized that had there been necessary support provided earlier, the strain on the sector would have been less severe, warning that continued neglect could lead to an even worse financial scenario in near future.

Although Mintoo is not entirely opposed to controlling money supply, he cautioned against excessive contraction. "We don't want to print money recklessly, but reducing the money supply too aggressively is detrimental to the private sector's credit growth," he said. 

He warned the tight monetary stance was causing inflationary pressures that were pushing up commodity prices. Mintoo also raised alarm over the broader economic implications of the contractionary monetary policy, particularly causing slowdown in private sector investment. 

"There's no improvement in investment-on the contrary, it's going down sharply," he pointed out. The tightening of credit, he explained, is stifling the ability of businesses to invest, expand, or even maintain operations, which could have long-term detrimental effects on the economy. 

According to Mintoo, the inability of businesses to access capital could undermine key macroeconomic fundamentals, leading to stagnation in the private sector.

"There's a clear risk of a 'clash' between the decline in investment and persistent inflation," Mintoo warned. He foresaw a future in which both high inflation and a lack of investment could become entrenched creating a volatile economic environment. 

This combination of high inflation and low investment, he explained, could trigger a broader economic downturn if not addressed promptly.

Mintoo called on Bangladesh Bank to reassess its current strategy and adopt a more balanced approach that could control inflation while simultaneously providing sufficient liquidity for the economy to function. 

"The policy needs to strike a balance between controlling inflation and ensuring enough liquidity for businesses to thrive,"he said. His remarks come at a time when the banking sector is under immense pressure, with liquidity constraints, high inflation, and diminishing investment all converging to create a precarious economic environment. 

The coming months will be crucial in determining whether Bangladesh can steer these challenges without further destabilizing its economy.

In a related development, Mintoo also discussed the broader macroeconomic landscape, particularly the disparity between the policies adopted for the public and private sectors.

He criticized the government for pursuing an expansionary monetary policy in the public sector while maintaining contractionary measures for the private sector. 

"The private sector is suffocating under tight monetary conditions, while the government is spending freely. This creates a significant imbalance that is holding back the country's development," Mintoo stated.

His comments reflect growing concerns about the uneven distribution of economic policies, with the public sector benefiting from more generous spending policies, while the private sector struggles under tighter credit and liquidity conditions. 

This divergence is contributing to a growing sense of frustration within the business community, as it hampers investment and job creation. "The private sector, which is the backbone of economic growth and employment, is being squeezed out," Mintoo lamented.

The business leader who was also a past president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) also drew attention to the issue of income inequality. According to World Inequality Report-2023, the top 1 per cent of earners in Bangladesh controls a disproportionate share of the country's wealth. 

He criticized the social structure, claiming that the wealthiest often exploit the system, leaving the business community to bear the blame for economic struggles. 

"There are two classes in Bangladesh-the wealth creators and the wealth looters. The former doesn't have the power to distribute resources, while the latter control and misappropriate them," he said. 

This growing inequality, he argued, is further exacerbating social unrest and creating a toxic environment for economic cooperation.

Mintoo emphasized that resolving these issues requires not just economic policy reforms, but also improvements in governance. He argued that a stable, democratic political environment is necessary for effective economic strategy and growth. 

"Good politics is essential for good economics. Without a stable and democratic government, no economic policy can succeed," Mintoo stated.

As Bangladesh grapples with inflation, a growing fiscal deficit, and rising public debt, Mintoo's concerns resonate with a broader debate on how to balance public spending with the needs of the private sector. 

Mintoo concluded by calling for comprehensive reforms in both economic policy regime and governance. He stressed the need for greater transparency and more equitable distribution of resources to foster a better environment for business and investment. 

His remarks serve as a reminder of the need for more inclusive policies that can address the systemic challenges facing Bangladesh's economy.

The comments by Abdul Awal Mintoo provide a sobering analysis of the current economic scenario in Bangladesh. With mounting concerns over inflation, a shrinking private sector, and governance issues, Mintoo's call for more balanced policies and reforms may be a crucial step in ensuring sustainable economic growth.  

The coming months will test whether the government and Bangladesh Bank can find the right policy mix to stabilize the economy and foster an environment conducive to growth, he said.



LATEST NEWS
MOST READ
Also read
Shomi Kaiser gets ad-interim bail for 3 months 
Govt warns of taking action against illegal foreigners 
Families of victims of enforced disappearance, extra-judicial killing demand justice
JnU JCD GS Nasir calls CA-coordinators meet unethical
AL leader dies in jail custody in Sirajganj
We will not use products of Hasina's friends: Rizvi
Govt seeks bank statements of Hasina, Rehana
Govt mulls int'l confce on Rohingya crisis next year: CA's press wing
Editor : Iqbal Sobhan Chowdhury
Published by the Editor on behalf of the Observer Ltd. from Globe Printers, 24/A, New Eskaton Road, Ramna, Dhaka.
Editorial, News and Commercial Offices : Aziz Bhaban (2nd floor), 93, Motijheel C/A, Dhaka-1000.
Phone: PABX- 41053001-06; Online: 41053014; Advertisement: 41053012.
E-mail: [email protected], news©dailyobserverbd.com, advertisement©dailyobserverbd.com, For Online Edition: mailobserverbd©gmail.com
🔝
close