Common currency in South Asia deemed infeasible now

A common currency in the South Asian region, like the euro for European nations, is not possible right now due to trade, economic condition, culture and regional differences in these countries.

In a panel discussion in the Fourteenth South Asia Economic Summit titled "Macroeconomic Cooperation and the Possibility of a Common Currency," speakers came up with this view. 

The two-day summit organised by the CPD on "Reframing South Asian Regional Cooperation in the New Context" started in the capital on Saturday. 

Dr Zahid Hussain, former lead economist of the World Bank Dhaka office, said South Asia is not suitable for a currency union currently, but greater economic integration may increase the incentive for monetary cooperation. 

"South Asia is not suitable for a currency union currently, but greater economic integration may increase the incentive for monetary cooperation" [Dr Zahid Hussain, Former lead economist, World Bank Dhaka office]

"The terms of trade and financial shocks have become more common. We need to operate the already established regional financial cooperation and frameworks more effectively, rather than reinventing forums."

Md Habibur Rahman, chief economist of Bangladesh Bank, said, "There are some pre-conditions to get a common currency. First of all, you should not keep borders among the countries, like capital and labour mobilisation. This is the first requirement you should have. We can see the euro -- before introducing this the European countries removed visa restriction among them. 

"There are some pre-conditions to get a common currency. First of all, you should not keep borders among the countries, like capital and labour mobilisation." [Md Habibur Rahman, Chief Economist, Bangladesh Bank]

"When you introduce a currency, you have to take the liabilities as well. Now the question is, who will take the liabilities? This is the question of management and controlling the liabilities. From that aspect, the compatibility of the economies is also important. If you have some countries that are dominant in nature, then you will be actually lagging behind." 

Ahsan H Mansur, executive director of Policy Research Institute of Bangladesh, said, "In the near future, it is tough to introduce a common currency in the South Asian region. We have to have close economic relationships among South Asian countries."

Emphasising on increased trade facilitation, he said, "Some facilitation has been made between Bangladesh and India, hope other countries like Nepal and Bhutan will include accordingly. The facilitation can also be spread by common documentation in trade. Why will we use different documentation for countries? We should standardise it to be more practical."

"In the near future, it is tough to introduce a common currency in the South Asian region. We have to have close economic relationships among South Asian countries." [Ahsan H Mansur, Executive director, Policy Research Institute of Bangladesh]

Mentioning that cross country investment in South Asia is very poor in terms of foreign direct investment, he said a big amount of investment should come from the neighbours instead of western countries. 

"We need to think about that. People-to-people relationships are very important. Visa and border issues are old fashioned in this region. Exchange and payment system harmonisation will be very critical, if you want to be practical on that." 

Professor Sachin Chaturvedi, director general of Research and Information System for Developing Countries (RIS), India was the chair of this event. He said, "We have been experimenting with digital currency for 1.5 years. The Indian rupee as digital currency is being tested at two levels." 

Dr Posh Raj Pandey, senior economic advisor, Ministry of Finance of Nepal; Dr Priyadarshi Dash, Associate Professor of Research and Information Centre for Developing Countries (RIS), India and Dr Abid Qaiyum Suleri, executive director of Sustainable Development Policy Institute (SDPI), Pakistan also spoke at the event.