Dr. Mansur made these remarks while addressing a seminar titled “Macroeconomic Landscape: Challenges in the Banking Sector and the Path Ahead,” organized by the Economic Reporters Forum (ERF) in Dhaka on Thursday.
Stability Amid Economic Challenges
The Governor noted several challenges within the economy but reassured that there was no immediate concern regarding foreign exchange and reserves. He highlighted that while reserves had dipped, the decline had been slowed. Dr. Mansur also pointed out that despite no funding from the IMF, remittances had risen by 24 percent and are expected to exceed 30 percent this month. By the end of this fiscal year, remittances are projected to surpass $30 billion, largely due to efforts in curbing money laundering.
He also mentioned that the central bank was no longer selling dollars, and the exchange rate between the bank and the curb market was almost identical, indicating improved currency stability.
Remittance and Dollar Market Stabilization
Addressing concerns over dollar manipulation, Dr. Mansur denied any interference with remittance rates, noting that although a group in Dubai tried to manipulate the dollar, the central bank remained unaffected. He further explained that the decline in private sector credit growth was not driven by higher policy rates but by reduced deposit growth. Additionally, government debt had decreased from 12 percent to 9 percent, which now requires banks to focus on lending to the private sector instead of relying on government-backed loans.
Banking Sector Reforms and Trust
Dr. Mansur discussed the importance of banking reforms, particularly in institutions with concentrated ownership, citing the case of a bank where one family controlled 87 percent of its funds. He pointed to the turnaround of Islamic banks as an example of how rebuilding depositor trust had led to improved lending activities.
Inflation and Monetary Policy
On inflation, the Governor explained that it takes at least 18 months for tightening monetary policy to show tangible results. In Bangladesh's case, it had been only six to seven months, and he expected it would take at least another five months to see significant effects. The central bank has maintained a contractionary stance to curb inflation.
Exchange Rate and LDC Graduation
Dr. Mansur highlighted progress in the banking sector reforms after August 5, particularly with the stabilization of foreign currency exchange rates and improved remittance flows. He also commented on Bangladesh's transition from Least Developed Country (LDC) status, questioning why the country should remain classified as low-income when it has demonstrated the capacity to be a middle-income nation.
“We achieved the capacity to graduate from the LDC category in 2021, but under pressure from the industrial sector, we extended the transition time to 2026,” he said. “Why should we remain a low-income country for tariff benefits when we’re already a middle-income nation?”
Call for Continued Reform and Economic Progress
Dr. Mansur urged continued reforms in the banking sector, emphasizing the need for the next government to remain committed to the ongoing financial stabilization efforts and to push for systemic changes that foster long-term economic growth.
ERF President Daulat Akhtar Mala welcomed the attendees, and the seminar was moderated by ERF's Joint Secretary, Manik Muntasir.