Dhaka, Bangladesh (BBN) - Bangladesh export growth dampens to the Euro zone following appreciation of the Bangladesh Taka (BDT) by around 15 per cent against the European Union common currency since September last, the International Monetary Fund (IMF) said on Monday.
The BDT appreciation against Euro eventually dampens growth of Bangladesh’s export to the Euro area but exports are not sensitive to Euro-area income, according to an IMF policy note, which was presented at a seminar, organised by the Chief Economist’s Unit of the Bangladesh Bank (BB), the country’s central bank.
“A NEER (nominal effective exchange rate) appreciation is not expected to have a large impact on import demand in Bangladesh, which is mainly driven by domestic activity,” it noted.
At the seminar, a visiting IMF mission advised the central bank of Bangladesh for taking measures to curb non-food inflation through monetary policy.
“Non-food inflation is a signal to the future direction of overall inflation in Bangladesh,” the IMF said another policy note.
It also said the monetary policy should, therefore, pay attention to non-food inflation shocks.
Impact of food price shocks has tended to be transitory and their second-round effects are small, according to the IMF note.
The IMF’s latest advice came against the backdrop of rising trend in non-food inflation in recent months.
Bangladesh’s inflation, as measured by consumers' price index (CPI), eased slightly in January last on both annual average and point-to-point basis mainly because of declining prices of food items.
Food inflation came down to 7.68 per cent in January 2015 from 7.91 per cent of the previous month on the annual average basis while non-food inflation rose to 5.64 per cent from 5.60 per cent, according to the Bangladesh Bureau of Statistics (BBS) data.
On the other hand, Bangladesh’s nominal lending rates are broadly in line with global and regional average, the IMF said in another policy noted.
It also said average nominal and real lending rates are not high by international standard. However, there is scope to reduce those further.
For this, policies should aim at reducing both inflation and stock of non-performing loans, improving loan recovery rates and eliminate NSCs (national savings certificates) or let NSC rate be equal to benchmark deposit rates.
The papers analyzed export and import elasticities, trends in core inflation vis-a-vis headline inflation, tracking economic activities via coincident indicators, and interest rate spread behavior in Bangladesh in the global context, the organizers said.
BB Governor Dr Atiur Rahman, deputy governors, executive directors, economic advisor and IMF mission members led by mission chief Rodrigo Cubero and Ms Stella Kaendera, Bangladesh Resident Representative of the IMF attended the seminar.
The BB governor hoped that such seminars would continue in the future so that “our researchers can be motivated to carry out high quality research for policymaking.”
He thanked to the IMF mission and the participants for lively interactions. The governor also welcomed the initiatives of the Chief Economist Unit to arrange an international research conference in December 2015.
BBN/SSR/AD-10Mar15-12:16 am (BST)