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Bangladesh Bank autonomy and Finance Minister Muhit April 14, 2014

Posted by bdoza in BANGLADESH.
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I first noticed the attitude of Finance Minister MA Muhit regarding the control of Bangladesh Bank over the other state owned banks when he arrogantly rejected BB to inquire into Hall Mark scam of Sonali Bank. He said that it is the Ministry of Finance that will look into the matter, not the Bangladesh Bank.
Muhit now slammed again BB’s proposal to have greater control over the state owned banks.[1][2]
The controversy creates storm.[1]
It is assumed that one of the main reasons for corruption in the banking sector is the poor control of BB over the state owned banks.

An ordinary citizen

Share Market Crisis: Whom to blame? January 29, 2011

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Government has formed an inquiry committee with Mr. Ibrahim Khaled as the chairman of the 3 member committee. He is given 2 months time to find out the loop holes of the share market of the past 2 years.

Even before initiating his investigation, the chairman said that it will be difficult to punish the stalwarts but atleast they will be able to identify the persons responsible for the irregularities of the share market.

In the meantime, immediately after the fall in the share market, a high level meeting in presence of the finance minister Mr.M A Muhith was held in the secretariat where fingers were pointed at a big businessman close to the government for the share market crisis.

The ordinary citizen does not like to blame any individual, rather he will blame the system or the regulatory bodies for the failure.

Barrister Moudud of BNP demanded the resignation of the finance minister. We don’t like to go that far. But atleast SEC should have taken the responsibility and chief of SEC should have resigned. 8angladesh Bank as policy maker and monitoring organization also should have taken some responsibility and should correct itself. So far an spokesman of SEC has been made OSD and an officer of SEC has been transferred. The measures are not enough to prevent the future collapse of the market.

The government also tried to revitalize the share market by the participation of the commercial banks in the share market. Many opine that progressive involvement of the commercial banks in the share market will jeopardize the share market as well as money market.

The serious concern is that if the offenders have political blessings, then the market will have little chance of revival.

An ordinary citizen

Bangladesh Bank rejects the contractionary policy suggestion by IMF July 27, 2008

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Thomas R Rumbaugh, advisor to the Asia and Pacific Department of IMF visited Bangladesh few days back and suggested a tight monetary policy for Bangladesh instead of Expansionary policy that Bangladesh is now pursuing.

He said that monitary policy should be less expansionary to contain the already high inflationary pressures. Bangladesh’s medium term outlook is positive, Rumbaugh said, but inflationary pressure is a major challenge.

Political uncertainty surrounding local and national elections is a short-term risk while dealing with climate change is a huge long-term challenge for Bangladesh, he added Escalating food and fuel prices in international market caused inflation in the country to go up, which averaged 10 percent in 2007-08 fiscal.

“It will be more difficult to check inflation if oil and food prices rise further in the international market,” Rumbaugh said.
[DS 15 July 2008]

Economists rejected the International Monetary Fund’s (IMF) advice to follow a contractionary monetary policy instead of an expansionary one, saying that the move would limit business and fuel inflation.

They criticized the IMF for pushing a policy, which had failed to bring any positive impact two years ago

“I do not agree with IMF’s opinion. Contractionary policies will be fatal for the economy,” Khandaker Ibrahim Khaled, former deputy governor of the central bank and incumbent chairman of Krishi Bank, said.

Zaid Bakht, director of Bangladesh Institute of Development Studies (BIDS) termed the IMF’s policy suggestion as a ‘wrong diagnosis’ of the economy.

“The accommodative monetary policy, which the BB is currently following, is the right one. There is no scope for shifting to a contractionary policy at the moment,” Prof Mustafizur Rahman, executive director of Centre for Policy Dialogue (CPD) said.

Asaduzzaman said businessmen would be in great trouble if private sector credit flows were squeezed. Ibrahim Khaled said if the IMF advice is implemented, raw material import and industrialisation would suffer.

“The BB should go slow if it wants to implement a contractionary monetary policy,” the BIDS director said.

“Inflationary pressures could be lowered by producing and increasing the supply of goods,” Prof Mustafiz said.[DS 17 July 2008]

Bangladesh Bank announced that it would continue to follow the expansionary monetary policy ignoring the International Monetary Fund’s (IMF) suggestion to tight it, to tame the surging inflationary pressures.

“If the policy is tightened at the moment, the pace of the economic activities may be hampered,” Bangladesh Bank (BB) governor Dr Salehuddin Ahmed told newsmen during announcing the monetary policy for July-December period.

“Monetary tightening can bring down inflation, but it has unacceptably high costs in terms of output and employment which Bangladesh can ill afford at present in view of its growth and poverty reduction imperatives,” he said.[DS 18 July 2008]

An ordinary citizen