The new monetary policy announced for the current fiscal year seems to be a continuation of the policy announced last year. No new changes have been made to the new policy. No new initiatives have been announced either.
But the new policy mentions taking up measures if any urgency surfaces.
The Bangladesh Bank announced an expansionary monetary policy last year. But the expansionary stance did not meet with substantial outputs thanks to the deteriorating pandemic situation.
The virus situation will determine how useful the expansionary stance of the policy would be.
Reviewing the runaway infection rates and the overall situation of the health sector, it seems that it would take time for the economy to return to normal. As a result, it will not be possible to achieve many targets of this monetary policy.
Without ensuring industrialisation and an investment climate, implementation of expansionary monetary policy prompts numerous risks for the economy. There are no effective measures to address the risks, though the new monetary policy statement acknowledged all these issues.
With some risks, banks can increase loan disbursement to risky sectors to cover the deposit costs. As a result, the volume of defaulted loans may also increase.
The monetary policy was supposed to have clear declarations on what kind of measures would be taken to solve all these problems. We hope a specific plan will be announced soon.
Against the backdrop of the current situation, there is no scope for taking a new expansionary stance in the monetary policy. Rather, some sectors need contractions or controls to be imposed.
But to do so, the government under the fiscal policy will have to spend from the revenue. There, too, the government's funding crisis remains as a major obstacle.
Dr Ahsan H Mansur, Executive Director, Policy Research Institute, spoke to Jahidul Islam of TBS over the phone.