Bangladesh will not revert to distortionary interest rate regime: Governor

Bangladesh will not revert to the previous distortionary interest rate regime, Bangladesh Bank Governor Dr Ahsan H Mansur has said, stressing that politically imposed interest rate controls will no longer be feasible.

He made the remarks on Tuesday (January 27) while speaking at a roundtable titled “ICC Round Table on Implications of LDC Graduation for the Banking Industry: Bangladesh Perspective”, held at a hotel in the capital.

The governor said interest rates are currently relatively high but underlined that Bangladesh’s graduation from least developed country (LDC) status is a necessity of time. “The distortionary interest rate cannot be imposed again through political pressure,” he said.

Dr. Mansur added that interest rates will be determined under a market-based system in the future, noting that bringing inflation under control is crucial to that transition. He also emphasised the need to reduce non-performing loans, restore depositor confidence, maintain stability in the foreign exchange market, and strengthen foreign currency reserves.

Speaking at the event, International Chamber of Commerce (ICC) Bangladesh Vice President AK Azad said around 1.2 million people have so far lost their jobs. He noted that private sector credit flow has declined while government borrowing has increased, adding that the financial sector cannot be normalised solely through the implementation of a tight monetary policy.