Make rate structure more market-oriented, IMF tells Bangladesh Bank

During a meeting with Bangladesh Bank officials last week, the IMF stressed the need to maintain a contractionary monetary policy to bring inflation down to 5 per cent.

Bangladesh’s economy is still facing significant pressure, the IMF said, advising the country’s central bank to make the interest rate structure more market-oriented.
It stressed the need to maintain a contractionary monetary policy to bring inflation down to 5 per cent.
It is concerned over the use of foreign reserves in forming the Export Development Fund and the growing volume of non-performing loans.

It also expressed concern over the use of foreign reserves in forming the Export Development Fund (EDF) and the growing volume of non-performing loans (NPLs).

Despite a requirement under the loan conditions to reduce bad loans in state-owned banks below 10 per cent, the figure has reportedly exceeded 40 per cent. Private banks also saw their NPL ratio surpass 10 per cent, double the stipulated 5 per cent limit.

Under the IMF’s $4.7 billion loan programme, Bangladesh has yet to fully achieve its inflation-control target.

The central bank informed the visiting IMF delegation that overall inflation had dropped to 8.36 per cent in September.

The IMF sought clarification on how the central bank plans to maintain investment momentum if the contractionary policy continues for an extended period, according to domestic media reports.

The delegation strongly objected to the bank’s practice of providing unsecured liquidity support to weak banks under its ‘lender of last resort’ policy.

It was satisfied with the current level of Bangladesh’s foreign exchange reserves.

The IMF mission will stay in Dhaka until November 13.

Fibre2Fashion News Desk (DS)