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Bank & Finance - January 2, 2024

Dollar crisis to be main challenge

Economy of new year

Zarif Mahmud: In 2023, the dollar crisis mainly pressures the economy. The dollar crisis was the main catalyst behind various concerns, including falling exchange rates and reserves, pressure on foreign debt repayments, inflation, problems opening LCs. Economists and bankers see the transition from the dollar crisis as the main challenge in the new year.
They said that to speed up the economy, it will not be right to control imports for a long time. Initiatives should be taken to increase exports and remittances to provide dollars for imports required for industrialization and employment. To increase remittances, emphasis should be placed on prevention of hundi. We must be strict in stopping money laundering under the guise of trade. Again, money laundering should be prevented by preventing benami loans. Dollar buying and selling rates cannot be fudged. Emphasis should be placed on reforming the financial sector to increase people’s confidence. Central bank supervision should be increased.
Former Professor of Economics Department of Chittagong University Moinul Islam told that the main way to speed up the economy is to overcome the dollar crisis. However, there are no signs of transition. Majority of remittances are now coming in Hundi. Due to hundi demand, remittances cannot be extended through formal channels. Failure to increase remittances through formal channels cannot stop the fall in reserves. If the reserves decrease, the value of the dollar will increase and the value of the rupee will depreciate. The pressure on inflation will increase further. Apart from this, garment export orders have been declining for several months. If this situation continues, the export earnings will decrease greatly, which will pose a danger to the economy. He thinks that there is going to be a one-sided election on January 7, which will not get much acceptance at home and abroad. For this reason, if any sanctions come from the United States or the European Union, the economic crisis will increase.
Executive Director of Policy Research Institute Ahsan H. Mansoor told that the problems that existed in 2023 will come to the fore in the new year. The biggest problem in the economy now is the dollar crisis. It is much like breathing. As long as there is, it is not understood. When there is not, one has to suffer in dire straits. All efforts should be made to deal with the dollar crisis in the new year. He said, there is a challenge in the new year election and post-election. It has an impact on politics as well as economy. And the economic challenges include reducing inflation, preventing a decline in reserves and stabilizing the dollar. The banking sector should be reformed in the medium term. At the same time the revenue should increase.
Meanwhile, Bangladesh Bank will announce the new monetary policy for the second half of the current financial year on January 15. There will be announcements of financial sector reforms and tough measures to control inflation. Apart from this, an idea will be given about the central bank’s initiatives to overcome the dollar crisis. The new monetary policy will be more contractionary as a condition of IMF loans.
Bangladesh Bank spokesperson and executive director Mejbaul Haque told that Bangladesh Bank is taking necessary initiatives to control inflation and stabilize reserves. Some strict steps have already been taken regarding the good governance of the banking sector. Which will continue in the new year as well. The central bank will take any initiative in the interests of the depositors.
He said that the central bank has taken various steps to achieve the inflation target. Direct lending to the government has stopped. Contractionary monetary policy is adopted. Reserves rose last month after a series of declines. Apart from this, there is now a surplus in the current account in foreign transactions. It is also expected to be in fiscal surplus by next June.

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