Zahid Hussain

If there ever was a challenging time for fiscal policy, this is it! The budgeting season for the government has started amidst a potential global health and economic crisis whose depth and duration are as uncertain today as when it started.

Inequality occupies a salient spot in Bangladesh’s development discourse. Most measures of inequality increased from 2000 to 2016.

The big question on economists’ mind is, how will the 9 per cent ceiling on bank lending rates impact the conduct of monetary policy?

Financial reforms have been on a reverse gear in Bangladesh. The latest being the announcement to return to a regime of interest rate repression.

This ought to be, if it already is not, the motto of stock market players in Bangladesh. Bangladesh Bank (BB) has left no stone unturned to show that it stands ready to put lipstick on everything to drive stock markets higher.

The surge in public borrowing from banks has significantly elevated the risk of further reducing the availability of credit to the private sector through two channels. One channel is through reducing the availability of liquidity for lending to the private sector. The other channel is interest rates.

Banks prefer to work with large national and multinational business groups and the government, which offer less risk and higher returns.

Thinking about the role of remittance in our economy often makes us think about growth and standard of living.

The Bangladesh Bank (BB) has adjusted the monetary programme for the current fiscal year. Although the adjustment is limited to just one component, it is a big one.

Like dead characters in Hollywood and Bollywood movies, paradoxes seem to reappear in Bangladesh’s economic landscape more often than analysts would like. Here are two new arrivals:

The debate on taka devaluation is a debate on whether the exchange rate is currently overvalued. How do we know?

Most economic indicators on the state of the Bangladesh economy during the first half of FY20 are down with one big exception—remittances.

In an interview published in this newspaper on January 3, the finance minister stated unequivocally “no currency devaluation”. Is such a sweeping stance compatible with the government’s own economic policy objectives?

It’s deja vu all over again. On June 21, 2018, Bangladesh Association of Bankers (BAB), a platform of private banks’ owners, agreed to cap the interest rate on deposits at 6 percent and the lending rate at 9 percent from July 1, 2018.

The stock of non-performing loans (NPLs) is increasing in both public and private banks. This is raising the threat to financial stability, impairing financial intermediation and damaging the resilience of the banking sector to shocks, thus increasing systemic risk. NPLs are also associated with higher funding costs and a lower supply of credit. However, the recent hot debate in Bangladesh has centred on whether high NPLs are a cause or a consequence of high lending rates.

Bangladesh needs to boost private investment from the current 23 percent of GDP to nearly 30 percent to accelerate and sustain growth as it moves up the middle-income path and strives to achieve the Sustainable Development Goals.

Bangladesh has made encouraging progress on the World Bank’s Ease of Doing Business (DB) 2020. The rank has improved by 8 places to 168 from 176 a year ago.

Bangladesh’s stock markets have been fluctuating sharply in recent years.

The government wants to form a public asset management company (PAMC) to buy distressed loans from banks.

Offshore Banking Units (OBUs) of domestic banks have borrowed from banks in the euro zone at 2 percent interest rate to meet their euro liabilities against Usance Payable At Sight (UPAS) issued by them to Bangladeshi importers. Simply stated, the UPAS issuing bank