A Dhaka economist says market policing, not rates, will tame inflation

In a column published in The Daily Star on 22 October, Sayema Haque Bidisha, an economics professor at Dhaka University, names persistent inflation and slowing investment as Bangladesh's 2 most pressing problems. Despite ample liquidity in the banking system, she writes, private sector credit grew by only 4.8% in August. Investment is stuck at 22% of GDP. A 62,000 crore taka stimulus package, announced by the central bank in May to reopen idle factories, has drawn limited interest.

Bidisha considers it reasonable to hold the 9.5% policy rate in the near term, but argues that monetary policy has limited reach against inflation. In her view the central bank faces a 2-sided dilemma: cutting rates would stoke inflation, while high rates squeeze business. She therefore sees market management as the main tool and calls for a firm crackdown on artificial shortages, anti-competitive practices and corruption in transport. She proposes bringing 3 ministries, trade, agriculture and food, together in a single independent inflation committee.

On investment, the author lists 5 priorities: reliable energy supply, the eligibility rules of the stimulus package, red tape and delays at land customs posts, political stability and financial governance. She writes that the energy crisis stemming from the Middle East has been partly contained. Still, LNG supply, output from existing offshore reserves and large-scale solar each need a plan over 3 horizons: near, medium and extended term. Bidisha also proposes 2 price measures: lower import duties on staple foods and no short-notice price adjustments, particularly on diesel.