Dhaka, Bangladesh (BBN)– The central bank of Bangladesh has designed its monetary policy statement (MPS) to achieve inclusive economic growth through discouraging credit flows for speculative motives.
“We conducted monetary policy, not through ‘helicopter-money’ but more through ‘ox-cart money’ that touches and transforms the ground,” Atiur Rahman, former Governor of Bangladesh Bank (BB), said while addressing at a seminar on ‘Innovations in Monetary Policy’ held at the World Bank (WB) Head Office in Washington DC on Wednesday.
The fully-packed seminar was chaired by Chief Economist and Senior Vice-President of WB Dr. Kaushik Basu, and attended by high officials and experts of the WB and the International Monetary Fund (IMF), including Executive Director Mr. SubhashGarg, Alternate Executive Director Mr. Musharraf Hossain Bhuyian, and Director Dr. Hassan Zaman, according to a message received in Dhaka from Washington on Thursday.
Professor Rahman shared his hands-on experiences as a long serving governor of Bangladesh’s central bank and talked how the institution got itself gradually transformed into a reputed developmental central bank with a wider participation of stakeholders without compromising its predominant role of controlling inflation.
He also passionately narrated the story of how a conventional central bank began to change and catalyze innovations and brought efficiency in the largely bank-based financial system and turned into an incubator for creative ideas within a short period of time.
In fact, it started setting good examples of public sector innovation and institutional reform, providing demonstration effect for sustainable impact, the former governor added. “It has also been playing a coordinating role with both private and public agencies.”
As a perspective to this transformation, he pointed out four critical transitions which Bangladesh has been undergoing simultaneously.
“These are rapid urbanization, young demographics, speedy technological adoption and industrialization. These transitions are synergistic and all need finance,” he noted.
The BB responded positively to this call and created adequate enabling environment for creation of entrepreneurs.
Dr. Rahman also said Bangladesh experienced unprecedented reduction of poverty (50% points+) and fastest growth of life expectancy (70 years+) just in four decades. “Thanks to the drive of financial inclusion, the growth in inequality has also been minimal.”
Moreover, the participation of women in labour force and rapid growth of smaller economic units, mostly in rural areas, have enabled deep structural transformation in Bangladesh, he added.
He also said the financial depth including massive inflow of remittances and activism of microfinance institutions have been conducive to this transformation.
Given this perspective, the central bank of Bangladesh focused on experimentation and implementation in conducting its monetary policy which ingrained socially and environmentally responsible financing ethos combing short-term management of business cycle fluctuation with long-term sustainable agenda, according to the former governor.
Simultaneously, the BB has focused on upgrading technology and market infrastructure, regulatory framework and selected refinancing initiatives.
“As a result, there was substantial improvement in transmission channels and desired macroeconomic stability with very little volatility by reducing risks through financial inclusion, improved regulation and strategic supervision with a bias for productive and sustainable activities,” he explained.
Dr. Rahman also claimed that all this led to desirable outcome of shared prosperity and hence social cohesion.
Of course, there are challenges ahead, said Dr. Rahman which may derive from persistent high NPLs, low level of quality digitization in the public banks and lack of desired level of autonomy of the central bank.
According to Dr. Rahman, Bangladesh is currently at the tipping point of a successful manufacturing take-off in a democracy and hence it needs to sale harder, reform faster, and implement better.
While concluding the seminar as a chair Dr. Kaushik Basu appreciated deeply the leadership role of the former governor.
He said: “It is wonderful to have the former Governor, Dr. Atiur Rahman with us at the World Bank. In terms of the range of the range of interest he commands, from standard monetary policy, through green financing, to ant-poverty programs, Dr. Rahman has few peers.”
One can see evidence of this in the stability of various macroeconomic indicators in Bangladesh over the last few years. “I encourage the World Bank economists to take advantage of his presence here to consult with him on any of these wide ranges of topics.”