According to Bangladesh Bureau of Statistics, the country's overall inflation has been above 9 percent for 9 consecutive months of 2023. Taking food inflation alone into account, it would be close to or above 12 percent. Considering this situation, the consumer has to spend Tk 109 in 2023 to buy Tk 100 product in 2022. It is necessary to think, how much money the wages have increased in that proportion. In order to keep the cost of living at the same level as in 2022, wages would need to increase by at least 9% in 2023. Has it actually happened? The central bank is responsible for the financial management of any country. For this reason the central bank is called the bank of the government. Bangladesh Bank is our central bank. A routine function of this bank is monetary policy formulation.
The main weapon in the hands of the central bank to control inflation is the effective use of monetary policy, i.e. the general rule of the economy is to increase or decrease the policy interest rate to control inflation. But it was ineffective for us for a long time. This work is done by the monetary policy department of Bangladesh Bank. It is one of the most important departments of the central bank of every country.
Before we had only central bank officials in this monetary policy formulation committee. Three more people are being kept in this committee from outside. According to this decision, the Monetary Policy Formulation Committee will have the Deputy Governor, Chief Economist and Executive Director of the Monetary Policy Department along with the Governor from Bangladesh Bank. From outside the central bank, the committee will include the chairman of the economics department of Dhaka University, the director general of the Bangladesh Institute of Development Research (BIDS) and a representative of the Policy Research Institute (PRI).
The monetary policy for the January-June period of the next financial year 2023-24 will be through the new committee. According to Bangladesh Bank sources, the monetary policy for the current quarter will be announced on January 15. This year's monetary policy will surely have something new than the previous monetary policy, hopefully. Opinions are being gathered from economists, bankers, entrepreneurs, journalists and traders on the upcoming monetary policy. Many are expressing their views in print and electronic media. This year's monetary policy has several challenges. First, inflation in the country is high. Inflation reached 9.49 percent in November. However, in October it was 9.93 percent. On the other hand, reserves are decreasing day by day. At one time there were 48 billion in reserves. Now it is less than half. An additional concern remains about liquidity. Due to some policy decisions due to Corona, NPLs were lower in the past year; But this time the defaulted loans have increased to over one and a half lakh crores of rupees. Since the introduction of the new smart interest rate, interest rates have been increasing month by month. Last December the smart rate stood at 8.14 percent. The interest rate on business loans will reach 11.89 percent. Loans are becoming more expensive day by day. This will increase the cost of business.
On the whole, monetary policy needs to be a bit exceptional in order to keep the dynamics of the overall economy in check.
Curbing high inflation and increasing reserves should be the main goals of monetary policy this year.
Anwar Farooq Talukder: Economics Analyst
