6-month tight monetary policy needed to curb Bangladesh inflation: PRI

Tight monetary policy, fiscal prudence and a rise in overseas income have helped stabilise the macro-economy, but high inflation and weak wage growth continue to weigh on households, according to the Policy Research Institute of Bangladesh (PRI), which recently called for maintaining a tight monetary policy for another six months to ease inflationary pressure.

A weak investment climate, coupled with political instability and uncertainty, brought investments to a standstill, leading to rising poverty through reduced real income and higher unemployment, the think tank said in its monthly macroeconomic insights.

Tight monetary policy, fiscal prudence and a rise in overseas income have helped stabilise the macro-economy, but high inflation and weak wage growth are hitting households, a Bangladesh think tank said.
Calling for maintaining a tight monetary policy for another six months to ease inflationary pressure, it recommended rethinking about expanding social-safety nets.

PRI principal economist Ashikur Rahman presented the insights in Dhaka.

The paper recommended rethinking about the expansion of social-safety nets and accelerating projects under the Annual Development Programme (ADP) to boost cash flow to the poor.

Business leaders at the event lamented high business costs—driven by a lack of energy security, political uncertainty, extortion and harassment by tax authorities—along with elevated interest rates as key factors behind weak private-sector investment.

Cautioning about rising unemployment and poverty, they warned that investment and economic growth are unlikely to recover unless these uncertainties are addressed.

The weak investment climate is also reflected in falling capital-machinery imports and a slowdown in construction activity.

High borrowing costs, timid credit growth and cautious deposit mobilisation have further dampened the investment outlook.

Fibre2Fashion News Desk (DS)