The central bank should emphasise on increasing forex reserves and reform the banking sector as well as halt giving loans to the government for now to control the rising inflation, eminent economist and executive director of the Policy Research Institute, Ahsan H Mansur said.
The government does not want any policy changes in the financial sector before the national elections. However, various crises have engulfed the economy including high inflation and foreign currency reserve crisis, said the economist during a meeting between Bangladesh Bank officials and economists regarding mitigating the instability prevailing in the economy held on Wednesday.
In the meeting, Dr Ahsan H Mansur suggested controlling inflation first to restore economic stability in the country.
According to him, the dollar market will stabilise automatically if inflation is reduced.
However, if it is not possible to make any policy changes or reforms in the financial sector before the election, then the central bank's main task should be to retain the reserves, he said.
Besides he also advised to increase and diversify exports.
Bangladesh Bank Governor Abdur Rouf Talukder was present at the meeting along with Finance Secretary Dr Md Khairuzzaman Majumder, Bangladesh Bank Deputy Governors Kazi Saidur Rahman, Abu Farah Md Nasser, Sajedur Rahman Khan, Noorun Nahar and PRI co-founder Sadiq Ahmed.
Bangladesh Bank officials have said the government has currently reduced expenses across various accounts, including land acquisition. Consequently, there is no immediate requirement for the government to seek loans from Bangladesh Bank.
Nevertheless, if the need arises, the government still has the option to obtain loans from commercial banks.
From Bangladesh Bank's perspective, there are no plans to introduce significant economic reforms before the upcoming election. However, there is an indication that substantial economic reforms will be implemented in the country after the election.
Additionally, Dr Ahsan H Mansur pointed out that the current practice of printing money without borrowing from the central bank is not conducive to the economy.
He provided several recommendations, including the importance of diversifying the country's import-export accounts.
Mansur emphasised the need to introduce diversity in the nation's trade accounts, stating, "Currently, the economy heavily relies on the textile industry in terms of international trade. If any issues arise in the textile sector, it could jeopardize the country's economy."
Concluding the meeting, Mohammad Mezbaul Haque, managing director and spokesperson of Bangladesh Bank, affirmed the validity of Mansur's recommendations.
He noted, "Inflation, the volatility of the dollar exchange rate, and the issue of non-performing loans are the most significant challenges at this time. Therefore, Ahsan H Mansur has provided guidance to tackle inflation as a top priority. In addition, he has emphasised the importance of prudently managing the government's borrowing and exploring new ways to generate revenue without resorting to loans."
Since the onset of the global economic downturn, economists have consistently offered various recommendations to Bangladesh Bank for addressing high inflation and improving economic conditions.
However, despite these recommendations, the economic regulatory authority has yet to implement significant reforms, while neighbouring countries have made notable improvements in their economic stability.
Earlier on 21 September, former government economic advisor Wahiduddin Mahmud engaged in discussions with Bangladesh Bank's Governor Abdur Rouf Talukdar.