I usually look at the credibility of monetary policy and what steps the Bangladesh Bank has taken, given the economic reality and its way towards.
Our inflation is based on imports. The central bank has identified soaring costs of commodities in the international market as the reason for rising inflation. It is not wrong but there is some ambiguity.
The Bangladesh Bank's monetary policy for FY23 aims at taming inflation, but the overall indicators of this monetary policy do not say it will control inflation. The central bank has raised the policy rate but has not done the basic work for controlling inflation. Lending rate has not been increased. Inflation in no way can be controlled unless the lending rate is increased.
In the monetary policy, the private sector credit growth target has been set at 14.1%, down from 14.8% last year. But the reality is that the average growth (provisional) in private sector credit was 13.1% in the just-concluded fiscal year. In other words, the growth target set for the new fiscal is higher than last year's growth.
I would say that every measure that has been taken to control inflation is conventional, which will hardly help to bring inflation under control.
The central bank's monetary policy has shown that inflation will come under control. In reality, the surge in inflation in our country is a result of a rise in our import-dependent products on the global market. Therefore, it is unreasonable that prices of products will increase in the world market and it will come down in the country.
The central bank has said it will introduce a new refinancing scheme to reduce import dependence and increase the production of import-substitute products to protect foreign exchange reserves. But this will actually increase money flow, leading to further inflation.
Zahid Hussain is the former lead economist at World Bank Dhaka office