Mohammad Badrul Ahsan :
Dr. Salehuddin Ahmed, a former governor of Bangladesh Bank (BB), has opined that the government should concentrate more on improving investment climate in the country to accelerate business activities.
He said that only lower interest of fund would not work well if the situation was not improved.
“I strongly believe that only low cost of fund cannot play roll to boost investment. Quality of infrastructure and power and energy also have impact on the issue,” he said.
He added: “Present rate of interest against lending and deposits in the financiers are quite justifiable. Almost all the banks are offering loans at single digit which was the main demand of business community and the government for long but what we are seeing in reality is that cheap fund could not boost investment significantly.”
Replying to a query regarding upward trend of foreign loan inflow in the private sector, the money market expert said, “As the rate of interest in local financial institutions is still higher than that of foreign one by 3 to 5 per cent, a section of local businesses still prefer to avail foreign fund.”
“In some cases, we know that local companies receive low cost foreign fund to repay the costly loans taken from local sources earlier.”
The money market expert, however, cautioned that if the companies, those are receiving foreign fund are not export-oriented, may put pressure to the government exchequer at the time of repayment.
“Considering the overall impact of foreign fund, the government should be more selective while giving approval to interested companies to avail fund from overseas sources,” he said.
According to the central bank data, inflow of the private sector foreign loan increased by 12.54 per cent during the last fiscal year compared to that of 73 in previous fiscal year.
The former BB governor also put his opinion on government’s borrowing at high rate of interest through saving tools.
He said the government sales different types of saving tools at high interest, mostly to support a group of its citizens.
“Elderly people, retired persons, women and some other specific segment of people are the main forecast of the government to give the privilege. So, we cannot say that selling saving tools at higher rate unjustified,” he opined.
Meanwhile, the former governor also urged the government to find out ways to keep affluent people away of availing the advantage.
“We see that many well-off people are also buying saving tools in bulk although the initiative was taken to support the needy. The government should way out mechanism so that rich people cannot avail the opportunity,” he said.
Dr. Salehuddin Ahmed is a Bangladeshi economist, civil servant, and a former governor of Bangladesh Bank. He was the ninth governor of the central bank. After the retirement of Fakhruddin Ahmed, he took the responsibility of the central bank on May 1 in 2005 and he retired from his duty on April 31 in 2009.
(The former Bangladesh Bank governor shared his views with The New Nation on interest rates against landing and deposits in banks considering the present investment climate in Bangladesh.)
