Economist and researcher Dr Ahsan H Mansur on Saturday said that printing money for helping the country's struggling Shariah-based banks survive would cause more inflation and devalue the local currency.

The practice is futile, overall, he said.

Bangladesh Bank prints money also to lend to the government, which also leads to increased consumer inflation.

He also highlighted a discrepancy in data provided by the central bank, saying the bank reports 11 per cent non-performing loans (NPLs), but the actual figure is 25 per cent.

In this backdrop, instead of the central bank, the government itself has to take the charge of revamping the country's financial system for addressing the ongoing financial crisis. Though the ruling party pledged to reform the system in its election manifesto in January, six months later, no notable change can be seen.

Dr Ahsan, who also serves as the executive director of the Policy Research Institute (PRI), called for a tight contractionary monetary policy aligned with the inflation targets.

“The central bank needs to hike policy interest rates, halt currency printing, withdraw remittance incentives, and adopt market-based interest and exchange rates,” he asserted. 

He emphasised the necessity of a strong forex reserve to maintain the confidence of donor agencies and foreign investors in Bangladesh.

At present, the government is filling the central bank stash with foreign currencies lent by multilateral lenders. This unsustainable practice has to be discontinued and replaced with more constructive means like strong remittance inflow, export earnings and anti-money laundering initiatives, Dr Ahsan recommended.

Incentives on remittances also have to be scrapped as the foreign exchange rate is currently market-based. The incentives only end up in the vaults of some Dubai-based institutions to cater to the interests of some "vested parties," he alleged.

He drew parallels with India’s financial reforms in the 1990s, saying that India’s extensive reforms brought their financial sector back to stability. Similar measures are now needed in Bangladesh.

bd-pratidin/GR