The “Bangladesh Bank Order” has been stuck in the Finance Ministry for the past four months, with no progress. Bangladesh Bank governor Ahsan H Mansur has said that this law is very important to protect the financial sector from political interference in the future.
He said these at a roundtable meeting titled “Implications of LDC Graduation for Banking Industry: Bangladesh Perspective” organized by the International Chamber of Commerce Bangladesh (ICCB) on Tuesday (January 27).
The governor said: “We have sent several important legal proposals to the government. The Bank Resolution Ordinance and the Deposit Insurance Ordinance have already been passed. Under these, five banks are being merged and the process of winding up nine non-bank financial institutions is underway. But it is very sad that the ‘Bangladesh Bank Order’ has been stuck in the Finance Ministry for four months.”
“If this law is not passed, it will be difficult to protect the central bank and financial institutions from political interference in the future. Some vested interests are creating obstacles when it comes to bringing fundamental reforms. If we cannot resist them, the country may go back to where it was before.”
Harsh criticism of the role of business organizations
The Governor harshly criticized the role of business organizations during the previous Awami League government.
“During the previous government, business organizations behaved like puppets. When the interest rate was fixed at 6% to 9%, they applauded. They were silent even during money laundering. Democracy is not strengthened by such behavior.”
Regarding graduation from LDC, the Governor said: “I do not see Bangladesh in the same category as countries like Afghanistan. Bangladesh now deserves the same status as countries like Thailand, Malaysia or India. Whether it is today or tomorrow—we have to graduate from LDC.”
He stressed that this transition will not be sustainable without human resource development, strong monetary and financial framework, skill development, logistics, communication, ICT, education and health sector development.
“It is not right to miss out on a big opportunity for a small benefit,” he added.
Ha-Meem Group of Industries Managing Director AK Azad said that inflation cannot be controlled by tightening monetary policy alone.
He claimed that due to the tight monetary policy, about 1.2 million people have already lost their jobs and another 1.2 million people may lose their jobs in the next six months.
He said that the private sector has taken only 6% of loans from banks, while the government has taken 27%—which could reach 32% in the future.
He also commented that the economy cannot be managed through monetary policy alone without increasing investment and employment.
Regarding the interest rate, the governor admitted that the current rate is relatively high. However, he said: “Historically, Bangladesh has rarely seen single-digit interest rates. $20 to $25 billion has flowed out of the banking system and defaulted loans have increased. As a result, the contraction was natural.”
However, expressing optimism, he said deposit growth has increased from 6% to 11% now. If good governance, increasing customer confidence and reducing defaulted loans are implemented, both interest rates and inflation will come under control.
