Economist Urges Halt on Bailouts: Save the Economy, Not Weak Banks

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Staff Reporter :
In a pointed address during a post-budget discussion, Ahsan H. Mansur, Executive Director of the Policy Research Institute (PRI) of Bangladesh, emphasized the importance of prioritizing the overall economy over rescuing weak banks.

His remarks were made at an event organized by the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), and PRI, held at Gulshan in the capital on Wednesday.

“The economy should not be destroyed in an effort to save weak banks,” Mansur stated, highlighting the detrimental impact of current policies.

He criticized the practice of providing funds to commercial banks that are experiencing liquidity crises due to their own inefficiencies, describing it as a counterproductive measure.

“Policies must be upheld; deviations cannot be made. This means we are restricting with one hand and releasing with the other.

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This approach will not work. Bangladesh Bank must stop supplying this liquidity,” he asserted.
Addressing the government’s fiscal strategy, Mansur urged a reduction in government expenditure by an additional 50,000 crore Taka.

He proposed cutting the amount of borrowing from banks to 90,000 crore Taka to facilitate the availability of 80,000 to 90,000 crore Taka for the private sector, thus restoring economic balance.

He also recommended that monetary policy rates be increased further from the current 8.5 percent to at least 10 percent without delay to curb high inflation.

“The government should focus on keeping the monetary policy stance tight to ensure price stability,” he said.
During his keynote presentation, Mansur described the 2024-25 fiscal year as one of macroeconomic consolidation rather than one for high investment and growth.

He emphasized that exchange rate stability, achieved through a tighter monetary stance, is crucial for meeting inflation targets. He also stressed the need for the interest rate structure to be governed by market forces.