Page 56 - ICE BUSINESS TIMES January 2020

P

BANGLADESH
ECONOMY

Due to the falling stock alive because there has been no
market index, small resolution of the conflicting
investors are losing their claims by the stakeholders and
regulatory boards. GP is the
Principles uncertain future? (General single largest company in this
investments and facing an
stock market, so the news had a
investors lost Tk 15,000
negative effect on the stock
crore, due to falling index)
market. Additionally, the banking
What are the remedial
sector has been riddled with ever
of Prognosis policy initiatives that can rising problems of
be taken to rekindle faith in
non-performing loans. According
the stock market and bring
to the latest count on September
back investors?
2019, the amount of NPL was Tk
It is indeed very unfortunate that
the stock market index has been 114 lakh crores which both in
absolute terms and in total
falling for quite some time and in proportions is the highest in
fact now it has sunk even lower, recent history. So this huge
In conversation with Asif Tarafdar, Dr. the DSC index lost 76 points and it volume of NPL is causing loss of
Mirza Azizul Islam, Professor, BRAC is now 4,419 which is less than confidence in the banking system.
Business School shares his opinion about half of the highest index that was And the growth of deposits into
in December 2012 (9812). There
the banking system has been
re-thinking our exchange rate policy, the are a number of reasons for this falling. As a result, banking
falling stock market and effective ways of eventuality. First,from time to sector shares have gone down
containing inflation. time, it has been observed that and it is still this sector as a Well for a country like Bangladesh in accelerating GDP growth.
there was a lack of coordination whole accounts for a substantial monetary policy is not very
and understanding among the portion of the total stock market effective. Because a large part of What can be done to ensure
various regulatory authorities. capitalization. the money supply comes from net the effectiveness of
For example at some point, In addition, the banking sector foreign assets, which is dependent monetary policy in
In recent years, while magnitude of the depreciation pressure from the workforce to Bangladesh Bank had put a limit problems create another situation on exports and remittance where containing inflation?
Bangladesh's major is probably somewhat lower raise their salary level leading on the investment by the banks in where some of the investors Bangladesh Bank has very little
competitors in the compared to other countries. to an increase in the cost of the stock market.Then they also borrow money from the banks control over. Borrowing by the I have found that money supply
global market, such as So, the question is, whether a production. imposed the requirement that and invest in the stock market. government is also part of money and inflation are not very much
China, Vietnam, India, devaluation will increase our Thirdly, if the exchange rate is subsidiaries of the of the banks, But because of slowing down of supply, where the central bank has directly related in Bangladesh.The
and Sri Lanka, have exports? deprecated, foreign buyers may which may be a mutual fund or deposits, the banks are not in a no control over. And the same primary factor which is
experienced significant Now, the basic argument try to negotiate for a lower price non bank financial institutions, position to extend credit to the thing applies also to various other responsible for inflation in
depreciation of their underlying exchange rate in dollar terms. The purpose of that the foreign buyers are their investment would also be private sector and the growth of government bodies that are Bangladesh is the exchange rate. If
currencies against the devaluation is that it will lead devaluation is to ensure constantly pressing for reduction counted as a part of investment by credit to the private sector has autonomous and statutory the exchange rate de-values,
US dollar, Bangladeshi to more revenue for producers get more money for of prices and in fact the unit prices the bank. Thirdly, it was also come down now to about 10% corporations. So a large part of the inflation increases.
taka remained quite Bangladeshi producers. the same dollar value. However, have gone down in recent time.So postulated that investment by the which is way below the monetary money supply is outside the The second issue is that, as we are productive investment then the
stable. How important Therefore, they will increase often the exporter complains if they succeed in negotiating a commercial banks in the unlisted policy target of 16% plus. These control of the central bank. importing raw materials and domestic supply of various goods
is it to re-think our their supply in the lower dollar price, that means the company's shares would also be factors coupled with the GP crisis There isn't really a strong link capital goods. Prices in the and services will increase and that
exchange rate policy to international market and they part of the benefit of devaluation treated as a part of the overall started a panic selling in the between money supply and international market affects our will have a positive effect.
stay competitive in will move along the supply will be transferred to the foreign investment.Now these things had market. So these are the main interest rate. And that's partly inflation and we cannot free Unfortunately in many cases, the
global trade? curve. But there are a number buyers. a negative effect on this stock reasons behind the distress of the because our banks especially the ourselves from that problem credit that flows is not used for
The case in point is of issues that might arise So there are concerns but that does market and later on Bangladesh stock market. private banks do not operate on because it would be unthinkable to productive purposes, some of it
be able to substitute those
goes into trade. I have seen that
Bangladesh taka remained from such a move. First of all, not mean that we should not give Bank retracted the decisions, so the basis of competitive principles imported inputs with domestic
stable while the exchange unlike countries such as some thought to further the the problems has been solved to The standard transmission they set the interest rates both for production in the near future. the agricultural loan is given t
someone who uses to buy a
rates of a number of China or India, our exports generative evaluation, but I think some extent. However, incidents channel of monetary policy lending and deposit collusively So, I don't see any particular way
neighboring countries are heavily dependent on I have found that money it should be the implications that I like this create a lack of confidence is that an increase in the and as a result even there have in which monetary policy can be motorcycle, or to construct a
house. So, these are not
particularly competitors of imported inputs. So if there is supply and inflation are have just mentioned should be in the overall market scenario. money supply would cause been many years and money made more effective in containing
Bangladesh in respect of a devaluation, the cost of not very much directly carefully analyzed and then on Concurrently, there have been a reduction in interest rate; supply has increased but the inflation. However, we may try to reproductive investments.In some
cases, there are complaints and
export specifically garment production will also increase related in Bangladesh.The that basis they should take a other regulatory issues. For this would lead to a rise in interest rate has actually gone up. increase domestic supply of goods
exports, have depreciated.Well because the imported inputs. decision. So, just because there is example at one point, Titas gas investment and thereby Consequently, monetary policy in and services through use of that the money is actually
eventually sort of smuggled out of
firstly, Bangladesh taka has Another problem that may primary factor which is some demand from some quarters, decided to reduce the wheeling higher aggregate demand general is not effective in monetary policy. The Bangladesh
also depreciated as current arise is that, an exchange rate responsible for inflation the central bank should not charges of gas that had an effect and higher GDP. The Bangladesh and is not an effective Bank and also the commercial the country. So the objective
should be to make use of
rate is about taka 84.9. And depreciation might increase in Bangladesh is the execute such a measure without on the stock market because experience in Bangladesh tool to control inflation. So given banks themselves ensure that the
two years back, it was domestic inflation. Now when exchange rate. If the making a thorough examination of substantial shares in the stock shows that this link does all those points that I mentioned. I credit that is flowing to the private monetary policy to incre
of output.So that if the supply
somewhere around 80 per the domestic inflation exchange rate de-values, the potential consequences of market.Then the problem with not work effectively, what don't think monetary policy in sector is actually used. For
dollar. But of course the increases there will be inflation increases. devaluation. Grameenphone which still remains is the reason behind that? Bangladesh can be very effective increases then price level is likely
to come down.
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