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M A Khaleque

  • Economist

Retired General Manager, Bangladesh Development Bank Limited and Writer on Economics

Second half-yearly monetary policy faces challenges
State action needed to harness demographic dividend
Economics

Second half-yearly monetary policy faces challenges

Five months have passed since the interim government took office, but there has been little sign of success in the economic sphere during this period. The interim government has been focusing more on addressing political crises rather than economic issues. The formulation of the new monetary policy is nearing completion. The Bangladesh Bank has started discussions on the proposed monetary policy with stakeholders. If everything goes as planned, this policy will be approved in the Bangladesh Bank board meeting on January 22, and then it will be published. This will be the second monetary policy of the current fiscal year and the first of the interim government. This will also be the first monetary policy under the new governor of Bangladesh Bank, Dr. Ahsan H Monsur. Since taking office, the new governor has taken several practical steps, including initiatives to make the foreign exchange rate and bank lending interest rates market-based. However, these steps should have been taken earlier. The previous governor failed to take effective actions in these areas, which led to a sluggish and downward-moving economy. Among all the recent monetary policies issued by Bangladesh Bank, none has been as challenging as the proposed policy.

Excessive foreign debt erodes financial independence
Bangladesh Bank
Economics

Excessive foreign debt erodes financial independence

In the 1970s, an American development economist visited Bangladesh. At one point, he gave a speech to the faculty members of Dhaka University. The economics department’s professors were notably present at this event. During his address, the American economist presented his views on why Bangladesh’s economic development was not progressing to the desired level. The professors in attendance listened intently to his words. At that moment, a young economics professor from Dhaka University stood up and said to the American economist, "The reason we are unable to achieve the desired level of development is because you are intervening in our economy in various ways." After a brief pause, the American economist replied to the young professor, saying, "If 80 percent of the funds for your country's development activities come from us, whose economy is it? If you were able to finance your development from domestic sources, we would not need to offer any advice." Hearing this, the young professor remained silent and sat down.

Adopt market-driven US dollar exchange rate
Adopt market-driven US dollar exchange rate
Economics

Adopt market-driven US dollar exchange rate

Following the advice of the International Monetary Fund (IMF), the Bangladesh Bank has taken the initiative to set the exchange rate of the US dollar based on market principles. However, the Bangladesh Bank is not yet fully leaving the determination of the exchange rate of the US dollar to the market. It is still retaining some control over the exchange rate. Through a notification issued by the Bangladesh Bank, the new system for determining the exchange rate of the US dollar is being implemented starting this January. This new method for setting the exchange rate of the US dollar can be described as a advanced step towards the currently prevalent 'crawling peg' system. Under the crawling peg system, a reference rate would be set for the exchange rates of the US dollar and other foreign currencies. Scheduled banks and authorized institutions engaged in foreign exchange transactions would then set the exchange rate by adding or subtracting one taka from the rate set by the Bangladesh Bank. For example, if the exchange rate for one US dollar is set at 117 taka, the market would follow that base rate with minor adjustments.

How was 2024, and how will 2025 be?
How was 2024, and how will 2025 be?
Economics

How was 2024, and how will 2025 be?

As the cycle of the year turns, we step into a new calendar year. The eventful year of 2024 has now bid us farewell. Among the most significant years in the political history of Bangladesh, 2024 stands out as unique in every way. The events of this year serve as a vivid example of how attempts to cling to state power in disregard of public opinion never succeed in the long term. The student movement, which was supported by various local and foreign groups, eventually evolved into a government-toppling movement, something no one could foresee. The government did not take this seriously. They may have thought they could suppress the student movement with force, just like previous protests. However, the government failed to realize that this student struggle was not a scattered event like past movements. It was a long-planned movement, and the government lacked the power to suppress it.