Dhaka, Bangladesh (BBN) – Former governor of Bangladesh Bank (BB) Atiur Rahman has suggested setting up a direct link between overseas exchange houses of local banks and mobile financial services (MFS) to revamp the flow of inward remittance.
Dr. Rahman disclosed the plan while replying to a query from the audience of Professor Shafiqur Rahman Memorial Lecture 2016 at the Asiatic Society of Bangladesh in Dhaka Tuesday evening.
“I was thinking about it, but could not implement the plan,” the former governor noted. “It would help reduce the possibility of illegal ‘hundi’ transactions.”
Currently, 29 exchange houses of 15 commercial banks were operating across the globe to expedite the inflow of foreign currencies from the wage earners.
The former BB governor’s recommendation came against the backdrop of falling trend in inward remittances in the recent months.
The flow of inward remittances drooped by 11.15 per cent or US$1.71 billion in the calendar year 2016 as compared to the previous year, despite a significant rise in the overseas jobs for Bangladesh nationals.
The expatriate Bangladeshi workers remitted $13.61 billion in 2016 against $15.32 billion a year ago.
In his lecture on ‘Prosperity for All, Poverty for None: A Journey Towards Financial Inclusion’, he emphasised on boosting both local and foreign investment for achieving maximum economic growth in the near future.
“A particular challenge will be to increase the investment rate to 34 per cent of GDP from 28 per cent if we really want to grow at 8.0 per cent rate,” he said.
He also said export diversification through trade policy reforms was necessary.
Institutional reforms relating to taxation, financial sector, land market, cost of doing business, climate change and urbanisation would be essential, said Dr. Rahman, a Development Studies Professor of Dhaka University. “Bangladesh is going through multispeed transitions, and hence in need of coordination and concerted effort to manage these.”
Financial inclusion was perhaps the best tool to ensure social cohesion in the midst of these transitions, he said, adding that this necessitates the developmental role of the central bank.
He also said bringing the informal sector workers under the umbrella of financial service is a key challenge for Bangladesh.
“As the bottom-up initiatives mature and bear fruit, we need to shift from the current money-stock-based targeting towards a market-interest-rate based targeting,” he said.
He also said that digitization needed to be strategically leveraged and managed to increase efficiency, market gaps, and price discovery.
The central bank’s autonomy remains as key to monetary policy credibility, the former governor added.
About the member of LDC, Mr. Rahman said numerous measures of development performance shows that Bangladesh does not belong to the LDC (least developed countries) group.
“In many respects such as high income growth, poverty reduction, human development and gender empowerment we have set a positive example for LDCs to emulate,” he explained.
In terms of the latest report on Inclusive Development Indicator (IDI) developed by World Economic Forum (WEF), Bangladesh has advanced from the 44th place to the 36th among 79 developing economies.
Besides, Bangladesh made solid progress in employment generating manufacturing, particularly in textile and other export oriented industries, according to Professor Rahman.
He also added this has left an equalizing impact in overall income distribution, as indicated by Paul Romer (Chief Economist, the World Bank).
“Putting Bangladesh in LDC group not only undermines the true development performance of the economy, but also weakens show-casing of this global good practice example,” the former governor observed.
Professor Khondoker Bazlul Hoque, chairperson of the Professor Shafiqur Rahman Trust Fund Management Committee, and Dr. Sabbir Ahmed, convener of the trust management committees and secretary of the Asiatic Society of Bangladesh, among others, spoke on the occasion.
BBN/SSR/AD