Leading economists have urged the Bangladesh Bank (BB) to prioritize the preservation of foreign exchange reserves and seek alternative energy sources to shield the national economy from the looming fallout of the Middle East conflict.
The advice was given during a high-level meeting on Saturday (March 7) between Governor Mostaqur Rahman and eight of the country’s top economists, held at the central bank headquarters in Motijheel. The session was convened to discuss policy strategies amidst rising global uncertainty caused by military tensions between the US and Iran.
Key Recommendations from Economists:
The economists emphasized that while the full extent of the crisis remains unclear, the pressure on the US dollar and national reserves is inevitable. Their primary recommendations include:
Preserve Reserves: Avoid spending dollars from the reserves to fund imports; instead, use existing foreign currency inflows strictly for essential stability.
Fuel Diversification: To reduce dependency on the volatile Middle East, the government should immediately explore fuel imports from alternative sources such as Brunei and Singapore.
No Immediate Hikes: Despite rising global prices, the experts advised against passing costs onto domestic consumers immediately to prevent a further spike in inflation.
Monetary Caution: They argued against lowering the policy interest rate (Repo rate) at this moment. While lower rates could boost investment, the priority must remain inflation control until the war-induced pressure subsides.
Governor Pledges Independence:
Governor Mostaqur Rahman, who took office on February 26, addressed concerns regarding political influence during the meeting.
“I will perform my duties with absolute honesty and will not make any decisions under political pressure," the Governor assured the economists.
He also instructed commercial banks to remain steadfast against external political interference in their decision-making processes.
Strengthening Financial Inflow:
The meeting also highlighted the potential risks to remittance inflows if worker movement in the Middle East is hindered. To counter this, economists suggested:
Smoothing the legal channels for expatriates to send money home.
Expediting the release of committed foreign loans from the ‘World Bank’ and other global lenders.
Seeking additional credit lines from the Islamic Development Bank (IDB) specifically for oil imports.
The distinguished economist panel included Dr. Mustafizur Rahman, distinguished fellow of CPD, Dr. Fahmida Khatun, Executive Director of CPD,
Dr. Mustafa K. Mujeri, former chief economist of BB, Dr. Mohammad Abdur Razzaque of RAPID, Dr. Selim Raihan of SANEM, Dr. Masrur Reaz of Policy Exchange, Dr. A.K. Enamul Haque, Director General of BIDS,
Nazmus Sadat Khan of the World Bank.
The meeting concluded with a proposal to form a standing committee of experts to provide regular updates and policy recommendations to the central bank to prevent public panic and ensure institutional stability.