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Strong forex reserves key to maintaining confidence of foreign investors

Dr. Ahsan H Mansur says at ERF dialogue


Published : 13 Jul 2024 09:31 PM

Economist Dr Ahsan H Mansur on Saturday emphasised the necessity of a strong forex reserve to maintain the confidence of donor agencies and foreign investors in Bangladesh.

Dr. Mansur, also the Executive Director of the Policy Research Institute (PRI),  warned that increasing supply of liquidity to Shariah-based banks could drive inflation and devalue the taka, urging immediate intervention to stabilise the banking sector.

 He was addressing the Economic Reporters' Forum (ERF) dialogue on “Causes of Crisis in the Banking Sector” held at the organisation's auditorium in Paltan, Dhaka.

Dr Mansur called for a tight contractionary monetary policy aligned with the inflation targets.

"The central bank needs to hike policy interest rates, halt currency printing, withdraw remittance incentives, and adopt market-based interest and exchange rates," he asserted.

Criticising the ongoing neglect of systemic problems, Dr Mansur said reforms to eliminate bad practices in the financial sector are essential for economic benefits.

He added that the sector's problems, including bad loans, irregularities, corruption, and money laundering, cannot be resolved by concealing them.

Dr Mansur called for a comprehensive cleanup initiative spearheaded by the government and involving the central bank. "Massive reforms in the financial sector require strong political commitment. Concealing data or manipulating information about defaulted loans or GDP will not aid recovery," he warned.

He drew parallels with India's financial reforms in the 1990s, saying that India's extensive reforms brought its financial sector back to stability. Similar measures are now needed in Bangladesh.