Bangladesh Bank to Raise Interest Rates Amid Rising Inflation Concerns

In the coming days, Bangladesh Bank Governor Dr. Ahsan H. Mansur has indicated that interest rates will be increased from the current 8.5% to 9%. This decision has been made to control inflation, as he recently mentioned in an interview with the BBC.

Dr. Mansur stated that the rate will be raised to 9% in the next one or two days, and it may further increase to 10% or more in the coming months. He explained that this gradual increase is planned, starting with 9%, then moving to 9.5%, and eventually reaching 10% over the next two and a half months.

The rise in the cost of goods has become a major concern for Bangladesh. Additionally, remittances have decreased, and political instability has negatively affected the garment export sector, putting pressure on the Bangladeshi currency.

At a time when food prices are at their highest in a decade and ordinary people are struggling, the increase in interest rates is a significant move. Dr. Shahadat Hossain, a professor in the Economics Department at Dhaka University, commented to the media that although the government has been raising policy interest rates to control inflation, the effects have not been evident in the economy. This is because, despite the talk of a contractionary economy, actual measures have been expansionary. Therefore, inflation was not controlled.

He noted that the interest rate hike is intended to control inflation, but it might actually lead to further inflation and may not have a positive impact on the economy. However, when global interest rates are high, foreign investors may become more interested in investing, which could help maintain the value of the currency.

In this context, when asked if small and medium-sized enterprises might suffer, he responded that higher interest rates could put them at a disadvantage and affect economic growth.