The central bank is using a lower valuation for the dollar to show a higher per capita income which is an unsustainable policy, economists said at a webinar on Saturday.
Addressing the webinar titled "Contemporary Global and National Economy: How Bangladesh should proceed" organised by the non-profit Banking Sector Policy Support (BSPS), experts said the fixed interbank rate of the dollar was not used by the market and the resulting discrepancies would make it difficult for Bangladesh to coordinate its foreign and economic policies.
They further said the penalty on six banks over charging higher than set dollar prices had fuelled fears in the market, with a new direction that everyone can support becoming the need of the hour.
At the webinar, Executive Director of the Policy Research Institute Ahsan H Mansoor said interbank rates were being used only when the central bank sold dollars, while at the same time global commodity prices had greatly impacted Bangladesh's trade balance.
"I think the foreign debt component of the budget will take its toll. We also have to take the burden of huge foreign debt. The only reason for this is to hold down interest rates. This will affect the balance sheet," he said.
Pointing out the differences between the interbank and kerb market rate of the dollar, he said now they had to take another rate into consideration: the rate of the money changers.
"Due to the pressure in the market, the price of the dollar is being set by it resulting in a chaotic forex market. I think the Bangladesh Bank still hasn't found a solution to stabilise the exchange rate.
On a question about the agricultural side, he said the government was doing a lot for the farmers, but increasing fertiliser prices would pose a problem amid the increase in diesel prices.
Dr Zahid Hussain, former lead economist of the World Bank's Dhaka office, said international policy had become tricky now and warned against suffering because of complacency.
Mentioning that economists will highlight the trade-offs of any decision, he said, it is the responsibility of economists to call it like it is.
"We have a tendency to assign blame," he said on the punishment of six bank treasury heads, adding their only crime was that they had profited, although imports and exports had both increased making banker profits a natural consequence.
"Regulators regulate banks, not individuals. A bank's job is to buy low and sell high; they did it for their organisation. Yet the regulator took action against individuals," he said.
Zahid Hussain also lent his support to the removal of subsidies from remittance, saying it could save Tk4,000-5,000 crore.
"We say remittance earnings increase because of subsidies. But is that really the case? Remittance showed a growth during Covid-19 but that was down to the closure of the kerb market. If it increased because of the subsidy, then why has it decreased again? It is time to rethink our subsidy regime," he said.
He also urged for quickened revenue mobilisation, especially for key development projects. "We want to achieve double-digit gross domestic product, but it is still stuck in single digits. People's taxes don't reach the government in full, a portion is collected by middlemen. We need to reform taxes and have a separate tax policy and tax administration," he said.
Kazi Mahmood Sattar, chairman, IPDC Finance Limited and chairman RSA Advisory Limited, said traders wait for market instability as they cannot make much profit when it is stable.
He, however, said that if exporters are buying dollars at Tk96-98, then LC settlement at Tk110 was just not right.
He also said inflation should have been controlled by increasing the price of money instead of demand, adding that the price of oil should have been adjusted beforehand.
Referring to the need for a stable decision from the regulatory, the IPDC Finance chairman said, "Our economy has improved a lot in the past 10 years and the banking industry has been providing a lot of support for the country in the past 50 years. Banks put in a lot of work behind the industrial growth we achieved in 30 years. I think the regulator needs to gain more confidence in the market."
At the beginning of the webinar MGK Jewel, senior relationship manager of the private Eastern Bank, gave a presentation on the past and present economic crises of the country and the world.