The Bangladesh Bank has rejected the International Monetary Fund鈥檚 suggestion to lower the policy interest rate, saying that no such move would be considered until inflation dropped to the targeted level.
The central bank鈥檚 stance on the matter was conveyed by its governor Ahsan H Mansur during the inaugural meeting with visiting IMF delegation on Sunday.
The meeting was attended by 13 IMF representatives, while four deputy governors, executive directors, directors and senior officials represented the Bangladesh Bank, according to Arief Hossain Khan, BB executive director and spokesperson of the central bank.
The central bank will consider lowering the policy rate once inflation drops below 8 per cent. The BB expected inflation to drop to 8.2 per cent by June.
He said that the IMF raised several issues, including the country鈥檚 failure to meet the tax-to-GDP ratio target.
While the IMF recommended a policy rate cut in light of easing inflation, the governor responded that the rate would remain unchanged until inflation aligned with the central bank鈥檚 target. On October 22, 2024, the central bank increased the policy rate by 50 basis points to 10 per cent.
The BB has begun to hike policy rate sharply since May 2022 when it was at 5 per cent. It raised the policy rate for the fifth time in 2024.
BB officials said that the IMF also recommended scrapping the current exchange rate mechanism and adopting a fully market-based system. The governor, however, said that no such decision would be taken until inflation reached a stable and desired level.
The IMF expressed satisfaction with the progress of monetary reforms tied to the $4.7 billion loan package.
In addition, various issues such as non-performing loans, foreign reserves, and the exchange rate were not discussed in the meeting, Arief said.
