Centre for Policy Dialogue (CPD) yesterday advocated an expansionary monetary policy instead of a contractionary one backed by Bangladesh Bank and International Monetary Fund (IMF) to contain inflation.
CPD expressed this view at a press conference for presenting an independent analysis on the state of the Bangladesh economy in 2011
The civil society think-tank thinks there will be heavy pressure on the government to adapt contractionary monetary policy due to the rising inflation.
But contraction can hardly control price hike, which is often linked with global phenomenon or supply shortages, its analysis observed.
Dr. Debapriya Bhattacharya, a distinguished fellow of CPD said, “Thus, monetary policy in the coming months should continue to accommodate increasing public and private investment demands,”
He, however, is surprised to see a rise in the price of rice even in aman season.
On inflation, he said monetary policy alone cannot contain it, and it needs to be addressed by a combination of policy measures.
Talking about the $1 billion loan the IMF agreed to provide, he said the conditions tied to loan might slow down the economic growth of the country.
“The government could have looked for other avenues, like the World Bank,” suggested Debapriya.
CPD believes that the IMF will tag other conditions, such as reduction of public expenditure and rise in tax collection, on the loan.
Debapriya said it has been proved in the last four years that Bangladesh can run without IMF loans.
“We don’t understand why the government has decided to borrow from them (IMF). We want transparency in the deal,” he noted.
After borrowing $490 million from IMF’s poverty reduction growth facilities scheme between 2004 and 2007, Bangladesh has moved to borrow around $1 billion under ECF (extended credit facility) arrangement in the next four years.
CPD also criticised the government for its poor performance with the implementation of the public sector investment despite undertaking a bigger outlay for the current fiscal year.
“No effective initiative is seen to speed up implementation of annual development programme and projects under public-private partnership (PPP),” he said.
The policy organisation forecasts a rise in interest rate of bank loans given the pressure of inflation.
On energy crisis, the CPD fellow said the sector continues to be neglected, and the government has chosen costly options to address the issue.
The CPD emphasized immediate use for coal-based power plant.
Prof Mustafizur Rahman, executive director of CPD, delivered welcome address and answered queries of journalists.