New Bank Chief Announces Rate Hike in Bangladesh
In an exclusive interview with the BBC, Bangladesh’s new central bank chief, Dr. Ahsan H. Mansur, revealed plans to raise interest rates from 8.5% to 9% within the next couple of days. He indicated that further increases to 10% or beyond might be implemented in the coming months to address rising inflation.
Bangladesh is grappling with soaring prices and economic strain, exacerbated by a currency under pressure from declining remittances and reduced garment exports due to political unrest. The International Monetary Fund (IMF) has advised tightening monetary policy and maintaining flexible exchange rates as part of a $4.7 billion bailout package for Bangladesh. Dr. Mansur is negotiating with the IMF to increase this support by an additional $3 billion.
In addition, Bangladesh is seeking further financial aid: $1.5 billion from the World Bank, and $1 billion each from the Asian Development Bank and the Japan International Cooperation Agency. The recent political upheaval, including internet blackouts and curfews before the ousting of Prime Minister Sheikh Hasina’s government, has also contributed to economic difficulties.
Dr. Mansur, who was appointed as governor of Bangladesh Bank last week by the interim government led by Nobel laureate Muhammad Yunus, highlighted the urgent need to overhaul the country’s banking sector. He described a significant “robbery” within the financial system, with funds allegedly siphoned off and hidden abroad. Dr. Mansur plans to establish a Banking Commission to audit banks comprehensively and propose solutions such as management changes, capital injections, or mergers.
The governor anticipates that up to $15-30 billion may be required to recapitalize Bangladesh’s Islamic banks, which might involve nationalization to protect depositors. Alongside monetary reforms, Dr. Mansur expects the new government to announce a substantial reduction in public spending, aiming for a 9-10% cut to improve credit availability for the private sector.
Dr. Mansur also suggested that elections might be delayed by up to three years or more, as Chief Adviser Muhammad Yunus has indicated that comprehensive reforms will precede the next general election.