Trackback URL
Download PDF A tight monetary policy would cost the country badly in terms of productivity and employment generation, observed Bangladesh Bank in its quarterly released yesterday.
“A contractionary (tight) monetary policy will adversely affect the country’s GDP growth, employment and investment,” Mustafa K Mujeri, chief economist of the BB, told reporters at the quarterly launching ceremony at the bank.
Earlier, the International Monetary Fund had suggested the central bank to switch over to a tight policy from the expansionary one to mitigate the soaring inflationary pressure.
“Although monetary tightening can bring down inflation, it has unacceptably high cost in terms of foregone output and employment,” the quarterly report said.
The BB would however closely monitor monetary aggregates like reserve money, broad money and credit growth before taking any corrective measures, if necessary to control inflation.
Besides inflation, the central bank quarterly identified possibility of floods and other natural disasters, socio-political instability ahead of the December national elections, power shortage and infrastructure constraints as the other major challenges that could harm the country’s macroeconomic stability.
Habibullah Bahar, BB economic adviser, among others was present at the programme.
The central bank’s quarterly flagship report said Bangladesh economy has not yet experienced full impact of global price rise of oil and commodities. Further increase of prices would have adverse impact on domestic inflation, it said.
Efforts by the government to absorb the impact of rising global prices on domestic consumers are more likely to become unsustainable largely due to its limited fiscal space.
Mustafa said bumper boro production could not impact market price of rice due to hoarding tendency of all, including farmers, speculating a rise in price. A good aman harvest might have a positive impact in the market, he hoped.
“Precautions against any unexpected natural calamities and timely supply of inputs to farmers are very important to minimise vulnerabilities,” he said.
So, the positive near-term outlook has to be supported by the macroeconomic policies for continued growth, economic stability, investment-friendly business confidence and private sector growth.
“For meeting such challenges, the policies need to build solid macroeconomic fundamentals supported by prudent monetary, fiscal and exchange rate policies,” the BB report said.
It also said Bangladesh needs to remain alert about competitiveness of its exports, especially price sensitive readymade garments.
The report stressed ensuring enough flexibility to absorb external shocks.
Comments are not moderated and only expresses personal views of visitors. BangladeshNews.com.bd is not responsible for commets posted by visitors.
Leave a Reply