Economy under pressure, not in crisis: Atiur ‘Difficult months to give way to a new equilibrium for economy’

Shayan S Khan and AKM Moinuddin; UNB Staff Writers

Dhaka, Feb 6 (UNB) - Bangladesh Bank governor Dr Atiur Rahman on Monday strongly refuted the view expressed in some quarters of the country being mired in a macroeconomic crisis and said there are pressures on the country’s economy but not the crisis.

He invoked Rabindranath Tagore to liken the Bangladesh economy to an autumn sky [shoroter akaash], filled with dark as well as silver clouds.

“Yes, there’re pressures but no crisis of the sort being talked about. We’re taking measures to make sure the silver clouds edge out the dark ones, and they are starting to bear results,” optimistic Dr Rahman told UNB in an interview at his office on Monday.
He revealed that the downward spiral in the exchange rate of the taka against the dollar had been “arrested” in the last two-three days. He and his team expect to see a further easing of the downward trend today.

Styling himself “not your conventional central banker”, the former development economics professor signed off on a note of optimism that a difficult few months would soon give way to “a new equilibrium” for the Bangladesh economy.

“We’ve been going through a correctional phase. This has presented a number of challenges, but we’ve responded with appropriate measures, in conjunction with the government,” he said.

Dr Rahman went on: “As a result, within a couple of months, we can look forward to the exchange rate, the rate of interest, and inflation settling at a new equilibrium.”

The governor attributed the policy of cutting down to non-essential import items (luxury goods) in recent weeks, something he had advised to ease the pressure on the balance of payments while releasing the latest Monetary Policy Statement on Jan 26.

Back in office today after his return on Saturday from a trip to India- where apparently other central bankers and economists from the region all had very positive things to say about the Bangladesh economy, some even branding it the “best-placed” under current circumstances in South Asia- the governor also sounded a positive note on inflation, saying he expects food inflation in particular, to decline during the month of February.

Although that would be offset by an increase in non-food inflation spurred by increased fuel prices and electricity rates, Dr Rahman is confident that the overall inflation rate will start witnessing a slowdown in the coming months.

Dr Rahman also expressed his confidence over securing the US$1 billion Extended Credit Facility (ECF) loan from the Washington-based lender - International Monetary Fund (IMF).

“The IMF mission arrives here tomorrow (Tuesday) to finalise the details …things look positive. If we get the loan, it’ll help a lot cut pressures on the Balance of Payments (BoP),” Atiur said.

He brushed off suggestions that availing of the loan would leave economic policymaking beholden to IMF conditions. “This is essentially a budget support for the government.”

“They don’t advise anything that is outside the purview of our own reform agenda. They only want those to be implemented. Anyway the ECF (extended credit facility, the scheme under which the loan would be disbursed) is different from the IMF’s Structural Adjustment Policies of the past, as it doesn’t attach any conditions,” Dr Rahman said.

The continuous price hike of food, fuel, fertilizer and essentials on the international market, food price hike in the internal market, high growth of money supply against the target and depreciation of the Taka were the reasons behind the rising inflation in 2010-2011 fiscal, Atiur said.

“Given that situation, we’ve taken cautious monetary policy. It’s corrective phase. Situation will improve,” he said.