Bangladesh Bank gives IMF a cold shoulder

by Sima Bhowmik

Concerned quarters have lauded the expansionary money policy announced by the central bank for the next six months.
For some, it came as a surprise that Bangladesh Bank paid little heed to the idea of a tight monetary policy as suggested by the International Monetary Fund (IMF), the lending organization which had on many occasions tried to impose its views on the government.
The Bangladesh Bank’s monetary policy for the January-June period had also been expansionary, an approach unavoidable for ensuring increased production and generate employment opportunities.
Despite sluggishness in the overall economic growth of the country, the credit growth has been 24 per cent, which is more than expected as claimed by the concerned quarters.
The country’s business community as well as the bankers had also been demanding increase in industrial credit flow, but the IMF’s adviser for the Asia and Pacific, Thomas R Rumbaugh, did not see things that way.
Rumbaugh, who led an IMF team that arrived in Dhaka on July 01 and left on July 16, on the eve of his departure told a press conference that the Bangladesh Bank should follow a less expansionary monetary policy to contain the already high inflationary pressure.
The Bangladesh Bank, however, announced an expansionary monetary policy for the next six months. 
The BB Governor Dr. Salehuddin Ahmed assured that the central bank would not do anything that may hamper private sector credit needs. He said the Bank would rather closely monitor the private sector credit flow so that it does not go to unproductive sector.
He observed that the country needed higher growth and increased production of essential food and other items to easy the inflationary pressures and so there was no way to squeeze the credit at present.  
Salehuddin Ahmed said the success of the policy stance requires greater fiscal and monetary coordination.  He also advised the government to limit its dependence on financing fiscal deficit by bank borrowing to reduce inflationary pressure.
The country’s economists were also critical of the IMF suggestion and reminded that the international lending organization had been pushing the government’s policy which had failed to keep any positive impact on the economy in the last two years.
Talking to PROBE News Magazine, the Bangladesh Arthonity Samity’s president Kazi Kholiquzzaman said, “I do not agree with the IMF’s opinion. We should take our own decision based on practical grounds. Tightening the monetary policy just to overcome inflationary pressure is not possible.”
He said the country’s import policy, trade policy and reducing trade deficiency should also be duly considered.
He observed that a crunch in credit might hamper the supply of goods and consequently fuel the inflation.
The only negative side of the present policy is that a major portion of the industrial credit is spent of importing raw materials.
Leaders of the trade bodies have also appreciated the Bangladesh Bank’s stand, but also said that the expansionary policy should be implemented in its true sense and its reflection should fall on the country’s overall economy.