DHAKA, May 2, 2024 (BSS) - Former central bank governor Dr Mohammed Farashuddin today said that the existing monitoring system needs to be changed to control inflation in the country.

"Inflation has been brought under control in almost all countries of the world. But, we're yet to do that. We need to change our monitoring system to control inflation. Instead of monitoring on TV screens, direct supervision should be increased. Otherwise, inflation cannot be reduced,"
Dr Farashuddin told a discussion on "Conversation with the Economic Reporters' Forum (FER)" held at its auditorium in the capital's Paltan area.

Citing that inequality has increased in the country, he said the poor of 30 years ago and the poor of today are not the same, there is a difference between them.

"We need to reduce inequality. The disparity between the rich and the poor existed before and still exists," he said.

The former Bangladesh Bank Governor, however, believed that the difference in money between the rich and the poor has increased compared to the past. "Reducing this inequality requires not only economic measures, but also political actions," he pointed out.
 
He said that Bangladesh's economy is being affected by higher inflation due to continuous re-scheduling of loans and printing notes to meet liquidity crisis in banks.

"People are experiencing higher inflation for a long period due to this loan re-scheduling cycle...it should be stopped to get relief from very high inflation," he pointed out.

To eliminate the liquidity crisis, he said the central bank is printing money and supply it in the market in various ways for which inflation is not decreasing.

Regarding bank merger, Dr. Farashuddin said that merger of banks is nothing new. "But, it shouldn't be done by force. The two banks that will be merged need to get their own consent. This is the usual way all over the world. It has also happened in Bangladesh in the past. It should be integrated by discussing within the banks, not by force," he said.
 
He said the decision of merging BDBL, BASIC Bank and Rajshahi Krishi Unnayan Bank (RAKUB) was not necessary, because these banks were set up for different reasons while those banks could have been nursed in other way.
 
Due to the rescheduling of loans, Dr Farashuddin said the banks have suffered financial squeeze. "For this, money has to be provided by printing through bonds. As a result, inflation is not reducing," he said.
 
He said the defaulted loans must be collected with strong hands. "These issues need someone to convince the policy makers. The volume of short-term deposits in the country's banks is high. Long-term loans from this sector create problems. That is why there is a need to strengthen the country's capital market," he pointed out.

However, the former Governor said the country's capital market is yet to get its full strength.

Regarding the loan defaulters, he said, if the defaulters become too big, then it is a problem.

"If anyone defaults on an agricultural loan of Tk 10,000, then banks put him in jail, but if anyone defaults on Tk 10,000 crore loans, then banks are saluting him. This can't happen," he observed.

Default loans, he said, must be recovered by taking action against the defaulters. Replying to a query, he said some unscrupulous food officials and mill owners are cheating the consumers.
 
As a result, the price of food in the country has increased, he noted.