Forex, the flexibility of interest rates necessary for the development of the market: Atiur Rahman

TBS Report

27 June 2022, 09:25

Last modification: June 27, 2022, 11:11 a.m.

Dr Atiur Rahman. Photo: PR

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Dr Atiur Rahman. Photo: PR

To ensure a modern monetary policy for a country like Bangladesh which is undergoing rapid structural change, exchange rate and interest rate flexibility are necessary ingredients for any market development, says the former governor and economist of the Bangladesh Bank (BB) Atiur Rahman.

He made the remarks while delivering the keynote speech at the first “MAM Kazemi Memorial Lecture on Monetary Policy” on Sunday evening.

The event was organized by the Bangladesh Institute of Banking Management (BIBM).

“I congratulate the current [BB] governor for emphasizing exchange rate flexibility, which should make it easier for the new governor to move in that direction,” he added.

Stating that there is a need to strike a balance between the central development bank and financial and economic stability, Atiur said, “We need to take more money out of traditional investment areas and put it to work at the grassroots level.

“I think that’s what central banks should be doing.”

“Pursuing traditional monetary policy as closely as possible to market imperatives and at the same time investing in the real economy to further increase the supply of goods and services. Let’s not jump. Let’s not be adventurous.

“Let’s hit the ground running and stay focused on what needs to be, we also need to be prepared to change course in the middle of the journey depending on the level of the crisis,” the former BB governor continued.

He said, “However, collaboration and partnership between stakeholders must remain our key strategy. It has worked well in the past. It will work better in the future as well.”

Speaking at the event as a chief guest, Fazle Kabir, Chairman of the Board of BIBM and current Governor of the BB, said, “Kazemi has formulated a new monetary policy for Bangladesh after the independence.

“He emphasized sustainable growth, stable inflation, fair exchange rates and an external trade balance.

Mentioning that the interest rate is not the only tool to implement monetary policy, BB Deputy Governor Abu Farah Md Nasser said: “Some experts have asked me to open the rates of Earlier, when the rate was high, the bankers came together to control it.

“BB had to step in because they didn’t. Inflation and credit growth, among other tools, are our consent to implement monetary policy.”

BIBM Chief Executive Md Akhtaruzzaman, former Mutual Trust Bank (MTB) Chief Executive Anis A Khan, as well as current and former professors and supernumerary officials, including senior BB staff, principal bankers and full BIBM professors attended yesterday’s program (June 26).