BB chief backs body to shield economy
The central bank governor has extended his all-out support to a proposal to form a high-profile committee involving politicians to monitor the global economic crisis and its impact on the local economy.
“We should come up with a strong body that will assess the effects of the crisis and accordingly make suggestions to shield the economy,” Salehuddin Ahmed told a dialogue organised by the Centre for Policy Dialogue (CPD) in Dhaka yesterday.
Some experts emphasised the formation of such a committee in line with the gravity of the situation.
The Bangladesh Bank chief hoped that members of such a body would play a key role in determining what actions should be taken to deal with the crisis fallout locally.
CPD Chairman Professor Rehman Sobhan presided over the discussion on “The global financial crisis and what it means for Bangladesh” at the Cirdap auditorium where policy makers, economists and analysts attended.
The financial crisis that first emerged in the US and started spreading like wildfire has resulted in a series of bankruptcies and mergers of banks and other lending institutions.
Subsequently, various governments, including in developing and poor countries, have been forced to take radical actions, such as setting up expert committees, to ease the situation.
The governor said: “It is not the Bangladesh Bank's responsibility alone, rather other stakeholders, including politicians, need to go for concerted efforts to avert the serious fallout.”
Dr Debapriya Bhattacharya, Bangladesh's ambassador and permanent representative to the World Trade Organisation in Geneva, presented a paper on the issue.
Bhattacharya, also the immediate past executive director of CPD, said a competent taskforce (committee) needs to be set up to assess the effects to design an adjustment package with both short and medium term policies and institutional measures.
The speakers at the dialogue stressed politicians' involvement in the initiatives to face the financial turmoil, pointing to the fact that Bangladesh is passing through a transitional period and will get a political government in a couple of months.
“We need a committee and politicians who are to run the country should be in place,” former finance minister AMA Muhit said.
Former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Mir Nasir Hossain echoed Muhit's view on politicians' involvement.
“We need to know what politicians think about the crisis and what are their suggestions,” he said.
Responding to a query, the BB governor said the central bank would not initiate the move to set up such a committee.
Salehuddin, however, said Bangladesh's financial sector problems are so deep.
“But we must be careful,” he cautioned, citing a BB move that didn't allow any short-term portfolio investment, which, he believes, was good for the country.
Debapriya said Bangladesh would not be immune to the global financial meltdown and its negative spillover.
“The question is with the degree of the effects,” he said.
He predicted that revenues from merchandise and services exports might reduce following a deep slid in demands of the consumers in developed countries.
But, he said, impact of two other major areas flow of foreign aid and net foreign direct investment-- remain ambiguous.
There are some good sides of the crisis on Bangladesh economy, Debapriya pointed out.
“Due to lower global demand, prices of oil will decline. Food and other commodity prices remain stable. There may be a fall in inflation rate,” he added.
Dr Mahbub Hossain, executive director of BRAC believed Bangladesh's exports would not be affected, as its products are low-income elastic ones. He, however, asked the government to increase the domestic demand base so that the country can sustain shocks from the global crisis.