Brushing aside main opposition BNP’s claim that the country's economic condition has become  vulnerable, Bangladesh Bank (BB) governor Dr Atiur Rahman on Tuesday  said that  the economy is still in a  better position.

"Some quarters have been spreading 'false' propaganda against the country's present economic condition,” the central bank chief told  a  discussion, organised by Bangabandhu Foundation, Bangladesh Bank, in memory of  the veteran Awami League leader Abdur Razzak in the city.Atiur said, "The foreign currency reserve was 2.2 billion dollars during the first three years of the BNP-led government. But it stood at $10 billion during  the last three years of the AL- led government."

 He noted the per capita income was 18-19 percent during the  BNP-led government but now  it has exceeded 25 percent. The disbursement of agriculture loan has been raised by 30 percent compared to the BNP regime, The BB governor observed that the present government has brought the country's rate of  poverty  to 31 percent from 40 percent.

 "It is a great achievement of the present government," he added.But he admitted that the Bangladesh is yet to get any foreign aid this year because of global   recession.The memorial meeting, chaired by Delwar Hossain Khan Razib, the foundation president, was also addressed by eminent journalist Abed Khan and labour leader Manjurul Haque. Earlier on Monday, the central bank released explanation on its contractionary Monetary Policy Statement (MPS), which will be continuing for the second half of the financial year 2011-12. 

This MPS aims to bring down the double-digit inflation to a single-digit one by the end of the current fiscal.Bangladesh Bank (BB) explains that high cost of food at both domestic and international markets¸ reduction of government subsidy to fuel and fertiliser, good flow of remittance and devaluation of taka against dollar are contributing to high inflation rate.

The bank forecasted that the inflation rate would become static in the coming months of the fiscal and will get a downturn in the last three months of the fiscal due to the tough Monetary Policy Stance taken by central bank and an ongoing gloomy economy in European countries.It said the BB’s  Net foreign Investment Reserve (NIR) and Net Foreign Asset (NFA) take a negative flow due to the reduction of foreign assistance for government's deficit financing along with depreciation of taka against dollar, low reserve situation and high inflations.

 Taka devaluated about 15.5 percent against dollar in 2011, which increased cost of importing goods and put further pressure on the skyrocketing inflation. The bank in the first three months of the fiscal poured about US$636 million from foreign exchange reserve to the market to reduce the depreciated pressure on the money.

 According to the MPS, BB said it has to follow a tight liquidity regime in the monetary market. As part of the stance, the bank supports liquidity by repo to only government primary dealer banks instead of all commercial banks and financial institutions.The special repo is open for only limited scale against high interest.It said due to the crunch in liquidity and opening a free limit for interest rates the central bank will strictly vigilant against banks so that they shall not impose interest rate at a level which would create sufferings to the clients.    

The BB said the MPS would influence lifestyle to the elastic group of consumers and the existing gloomy European economy will help reduce food price to Bangladesh which will ultimately help reduce the inflation rate.It said the current government borrowing from banking system does not put it at risk level but if the government increased its borrowing further it would pose a serious risk to the private sector credit.

The Daily Independent/Bangladesh/ 11th Jan 2012