Dhaka: Dr. Debapriya Bhattacharya, Distinguished Fellow at the Centre for Policy Dialogue (CPD) and Convenor of the Citizen’s Platform for SDGs in Bangladesh, has emphasized the need for the upcoming Monetary Policy Statement (MPS) to incentivize supply-side responses and ensure financial flows to the private sector.
According to Bangladesh Sangbad Sangstha, Dr. Debapriya noted that the next half-yearly MPS, scheduled for release between January and June 2025, will emerge amidst a challenging macroeconomic environment influenced by the misgovernance of the previous political regime. He stated that a key task of the MPS will be to document the current state of the financial sector, as outlined in the White Paper on the State of the Bangladesh Economy. This was discussed during an interview with BSS at the CPD Centre.
The central bank is set to announce its new MPS for the latter half of fiscal year 2024-25 within the first half of the coming month. Dr. Debapriya emphasized the importance of the MPS in detailing the corrective and reform measures undertaken by the Bangladesh Bank since the new administration’s inception. He highlighted the necessity for transparency in addressing supply-side responses and formulating a credit approach to finance the private sector, particularly small and medium enterprises.
He further pointed out that certain sectors, such as steel engineering and the tea industry, are currently facing significant debt burdens and require additional liquidity support. Dr. Debapriya also acknowledged the challenge of rising interest rates, a consequence of the contractionary monetary policy, which has adversely impacted private investment, leading to historically low credit growth in the private sector.
Dr. Debapriya stressed the evolving need for banking sector reforms and the urgent requirement for reforms in the non-banking financial institution sector. He suggested that the government may need to consider closing down some non-banking institutions that have outlived their viability.
In the upcoming MPS, he advocated for a focus on improving private investment and enhancing supply-side responses through trade or fiscal policy stimuli, alongside the ongoing contractionary monetary policy. He urged the government to address pending reform issues and improve transparency by exposing corruption and illicit financial flows.
The economist also questioned the government’s economic legacy and urged it to consider the historical impact of its economic policies. Dr. Debapriya commended the government’s efforts to stabilize the economy and tackle corruption, emphasizing the importance of leaving a positive economic legacy.