The announcement of a single monetary policy a year is not right, given constant changes in banking, trade and financial sectors. Such a policy should be formulated twice a year.
And, the monetary policy announced for the fiscal 2021-22 is a conventional one like the previous year's with not many changes in it. It is called another expansionary monetary policy maintaining appropriate cautions but there should have been a condition of excess liquidity.
There should also have been clear instructions to banks about how much liquidity they would provide to which sectors. The monetary policy announced has not given any specific targets for banks to disburse credits to cottage, micro, small and medium enterprises, agriculture, livestock and various other sectors in this pandemic time.
The Bangladesh Bank has said people from different walks of life, including those in the hotel and tourism sector, have received benefits. They will get more. But we do not find what benefits the people of these classes have got. Everyone's income has decreased.
In the monetary policy, the central bank says the agriculture sector will get credit at 4% interest as before. Other sectors will also be provided with low-interest loans. But, banks are yet to come out of their conventional approach of lending to big borrowers and ignoring small ones. There is a fund but people have no access to it.
Nobel laureate Prof Amartya Sen said there are rice and pulses in warehouses, but common people do not have access to it as they do not have purchasing power. The same has happened in our banking sector. There is liquidity but small borrowers are not getting access to that liquidity. So, putting money into people's hands is more important than announcing a monetary policy.
The Bangladesh Bank in the monetary policy also talked about employment. But, we see the central bank's self-satisfaction in this regard. It is taking all the credit for Bangladesh's good performance in employment. In fact, this improvement has been possible, thanks to people's efforts and various policies of the government.
The Bangladesh Bank has said it will focus on monetary management and supervision. But, there are no specific instructions in that regard. It is not clear who will take action against irregularities.
In our banking sector, there are huge default loans, poor audit reports, and fraudulent reports in banks. Banks have additional exposures to the capital market. But, there are no clear directives regarding what actions will be taken against those. One inspection after another is going on but no one is becoming compliant.
So, more emphasis should be placed on supervision and monitoring. If a target can be set and implemented accordingly, the monetary policy would have a good combination with the government's fiscal policy.
Dr Salehuddin Ahmed, former governor of Bangladesh Bank, spoke to Abbas Uddin Noyon of TBS over the phone.