Economists divided on lending interest cap

Business Desk :
Economists and experts at a conference on Saturday were divided about withdrawing the lending rate cap to tame inflation.
Almost all the economists favoured withdrawal of the interest rate cap while some policymakers and businessmen were against it.
They were addressing a session titled “Economic policy: Addressing post-Covid Challenges” of the Annual BIDS Conference, moderated by BIDS director general Binayak Sen at a city hotel.
Economists Sadiq Ahmed, Debapriya Bhattacharya and Prof Mustafizur Rahman emphasized the withdrawal of both interest and deposit rate caps.
PM’s private-sector Adviser Salman F Rahman, Principal Secretary Ahmad Kaikaus, Towfiq-E-Elahi Chowdhury, businessman Anwar-ul-Alam Chowdhury and FBCCI President Jashim Uddin favoured the current interest rate cap for protecting domestic industries.
Meanwhile, most of the speakers agreed to go for massive reforms in the revenue board to boost local resources income amid the current economic shocks.
Centre for Policy Dialogue (CPD)’s distinguished fellow Dr Debapriya Bhattacharya said Bangladesh’s present economic crisis is not fully a global crisis, rather it is a failure to implement some government policies.
“There are some legacy issues in the country, which are affecting our macroeconomy more than the impact of the external crisis,” he said.
“Many people say that the external shock is the main reason for Bangladesh’s present economic crisis. But that is partially the problem and the local legacy problem is much more influential than that. Our low tax-GDP ratio, absence of quality public fund spending, and lack of quality development expenditure are the major concerns for the economic crisis now.”
Meanwhile, another CPD fellow, Prof Rahman, questioned the suggestion to the government to limit the interest-deposit rate. He also criticized the government for offering black money-whitening provisions and banking directorship reforms.
Kaikaus said: “If the low interest rate expedites local investment, why will we withdraw it?”
PM’s adviser Salman Rahman said: “Since the size of the domestic economy is about 70%, we have to think of them regarding their cheap bank loans.”
Dr Zaidi Sattar stressed on making trade competitive rather than protectionism to compete with other trade partners in global markets.