Dr. Atiur Rahman

Why developmental role for a central bank? 

 

Rounds of post GFC large scale QEs in advanced economies have achieved little in shoring up flagging global growth, instead debilitating monetary policy and creating deflation risks by driving down interest rates in major currencies to near zero levels. The hope that faster growing emerging economy groups like the BRICS will take over global growth stewardship has also dimmed. Global trade growth slipping below the sluggish global output growth has further deepened the gloom. Bangladesh, like other inclusive growth focused developing economies,  has therefore gone about upholding growth with measured moderate monetary growth proportionate with real output growth expectations, alongside guidance for lenders in channeling the financing inclusively into output initiatives in all economic sectors.This attention to directional guidance has helped farm, non-farm MSMEs flourish in rural and urban communities, augmenting domestic output on the supply side and incremental employment and income on the demand side.

 

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Bangladesh has therefore gone about upholding growth with measured moderate monetary growth proportionate with real output growth expectations, alongside guidance for lenders in channeling the financing inclusively into output initiatives in all economic sectors

Bangladesh Bank’s developmental initiatives 

Besides maintaining macroeconomic and financial stability, Bangladesh Bank has also been supporting rapid broadbased inclusive economic growth through its multipronged financial inclusion initiatives. Bangladesh Bank’s engagement to inclusivity and sustainability is direct and explicitly pronounced in its monetary policy statements. The motivational thrust of ingraining a socially responsible financing ethos has sensitized the financial sector in reaching out to the underserved and excluded population segments with the financial services they need. The thrusts are on output initiatives in agriculture supporting food security and price stability; SME financing promoting output, employment and income generation; green financing supporting environmental sustainability; and digital inclusion facilitating the ‘Digital Bangladesh’ vision of the government. In recent years, Bangladesh Bank has brought about deeper engagement of the financial sector in the development role with a social responsibility driven financial inclusion drive. Accordingly, Bangladesh Bank has taken up comprehensive reform and up-gradation of the county’s financial market infrastructure, including: nSetting up of fully automated nationwide online clearing and settlement system;n Bangladesh Real Time Gross Settlement (RTGS);n Hastening automation in banks;n Customer interest protection for new customer segments;n Launching of mobile financial services (more than 28 million accounts);n No frill accounts for the disadvantaged and students (more than 16 million accounts);n Mandatory credit for agriculture, SMEs, renewable energy, and so forth Recent financial inclusion initiatives are supported by advanced technology, which has drastically reduced costs, increased the reach, and allowed new players to leapfrog constraints.

 

Stability outcomes 

 

Output growth focused directional guidance in inclusive financing has helped Bangladesh maintain steady, stable spell of six-plus percent real GDP growth for well over a decade, which is around twice the rate of global output growth. Over the last decade, Bangladesh economy had the least volatile GDP growth and inflation in South Asia. Further, the growth performance is quite inclusive and balanced, reflected by steady growth in all economic sectors (agriculture, industry and service). Stable downward edging CPI inflation (now about six percent); low, single digit fiscal deficit, and strong gains in external sector viability with appreciation pressure on Taka, positive export growth amid demand weakness in external markets, buoyant foreign exchange reserves (USD 27 billion with 7 months of import cover), and remittance inflows (more than USD 15 billion in FY15) are the defining features of the Bangladesh economy. Socioeconomic performances are quite exemplary; Bangladesh has achieved most of the MDGs well ahead of time, with rapid fall in poverty from 48.9 percent in 2000 to 24.5 percent in 2015.

 

The way forward 

 

The performance of Bangladesh economy is grounded on very inclusive and broad-based nature of growth, which already earned much global recognition.  Now, our goal is to deepen, widen, and further improve the quality of inclusive financing programs to The way forward The performance of Bangladesh economy is grounded on very inclusive and broad-based nature of growth, which already earned much global recognition.  Now, our goal is to deepen, widen, and further improve the quality of inclusive financing programs to ensure environmentally sustainable economic development. All the government organs with the lead role of the private sector need to work hard to pace up our inclusive socioeconomic growth and development momentum towards attaining higher middle income country status by 2030 and advanced economy status by the decade of forties. We also need to put more attention towards long term mobilization of savings, and quick completion of the infrastructure projects. A USD 1 billion Taka Offshore Bond will be launched soon by the Bangladesh government with support from IFC, to invest in private infrastructure projects and PPPs. Bangladesh Bank has recently launched a USD 300 million investment fund to boost medium-and long-term investment, and another USD 200 million BB fund will be launched soon to facilitate green financing in the productive sectors, including textile and leather. The key requisites for upholding domestic demand-driven growth will be the social empowerment of, and inclusive financing support for output initiatives of all population segments. Adaptation to looming global warming-driven sea level rise threats, and broader countrywide transition to energy efficient low emission output practices are the other major new priority areas for attention.

 

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