Finance Minister is not in favor of raising interest rates to control inflation

Interest rates are now being increased in various countries to control inflation. But Finance Minister AHM Mustafa Kamal is not in favor of increasing the interest rate of loans in the bank sector to control inflation in Bangladesh. He said, ‘In a country like ours, it is difficult to control inflation by increasing the interest rate. The way we implemented the interest rate of 9 and 6 percent in the banking sector is going well. Fiscal and monetary policies are used to control inflation. Bangladesh Bank does that work.

The finance minister said these things in response to a question from journalists after the meeting of the cabinet committee on government procurement on Wednesday. He had a question, the interest rate of bank loans is being increased in all countries of the world, whether there is any progress in the decision to increase it in Bangladesh.

This has been going on for two and a half years after the bank sector interest rates of 9 and 6 percent were implemented in April 2020. Last month’s sudden hike in fuel prices had a major impact on inflation. Since then, a new discussion on increasing the interest rate has started. Generally, when interest rates on loans rise, credit growth in the private sector slows down and people have less money in their hands. Then consumer spending decreases. This is how interest rates are raised as a way to control inflation in the world.
Bangladesh Association of Banks (BAB), an organization of bank entrepreneurs, appealed to Bangladesh Bank on July 22 demanding an increase in interest rates on car and house loans. A delegation of the International Monetary Fund (IMA) also suggested an increase in interest rates during a recent visit to Dhaka.

In response to the question that the foreign exchange reserves are decreasing, will it continue to decrease or not, the finance minister said, ‘Our situation is better than before. Exports are increasing, imports are decreasing. Besides, expatriate income (remittance) is increasing very fast. We earned $2400 million (expatriate income) in a year, $200 million a month. It has now gone over $200 million a month. The amount of dollars I am getting through expatriate income, it will not take long to get to the $4,800 crore I earned earlier.

Mustafa Kamal said, ‘I will think in the same way that advanced economic countries work with the currency market. We will fix it the way they fix it and we will gradually move to market based transactions.”

Import of 9 lakh tons of rice
Meanwhile, the Cabinet Committee on Economic Affairs has approved the import of 9 lakh tonnes of rice through direct purchase method. Of this, the Food Department will directly import 4 lakh tonnes from exporting countries. The department will import the remaining 5 lakh tonnes of rice on an urgent basis through open international tenders. The deadline for submission of tender for this will be 15 days from the date of publication of advertisement in the newspaper. Earlier the deadline was 42 days.

Fertilizers will come from Morocco and Canada
Apart from this, the cabinet committee on government procurement has approved the proposal to buy 90 thousand tons of MOP and DAP fertilizer from Canada and Morocco at a cost of 683 crore 13 lakh taka.

Additional Secretary of the Cabinet Division. Abdul Barik said, importing 50 thousand tons of MOP fertilizer from Canada will cost 386 crore taka and importing 40 thousand tons of DAP fertilizer from Morocco will cost 297 crore taka.