Written by The Banking Post
Finance Adviser Dr Salehuddin Ahmed has cautioned that lowering interest rates is a complex policy challenge, warning that missteps could trigger unintended ripple effects across the economy.
Speaking on Saturday at the launch of the seventh edition of the Banking Almanac in the capital, he said interest rates work through a chain reaction within the financial system. “Interest rates involve a chain effect. If we tighten one part, another one may bubble up. Lowering interest rates is not an easy task,” he said.
His remarks come amid mounting pressure from business groups calling for relief from prolonged high borrowing costs. Dr Ahmed said any decision to cut rates must be guided by treasury bill yields, deposit rates and overall liquidity conditions in the banking system.
The former central bank governor noted that treasury bill rates have eased in recent months, influencing benchmark interest rates. However, he stressed the need for balance, warning that excessive government borrowing could crowd out banks and weaken financial intermediation.
On inflation, Dr Ahmed said monetary policy alone could not address persistent price pressures. He emphasised supply-side management, stronger market monitoring and better coordination among traders and wholesalers, adding that enforcement actions by themselves were not enough to prevent profiteering or hoarding.
He also warned that excessive negativity around the economy could damage investor confidence and Bangladesh’s international image. “Policy decisions cannot be driven by populism or narrow interests,” he said, underscoring the need for coordination between fiscal and monetary authorities to safeguard macroeconomic stability. Despite criticism of recent measures, he said ongoing reforms were laying the groundwork for a more resilient economy.
Finance Secretary Dr Md Khairuzzaman Mozumder said the financial sector had faced stress over the past 18 months but conditions were improving. He said problems related to letter of credit payments had largely eased, several troubled banks were recovering, and efforts were underway to repay depositors of struggling institutions.
Nazma Mobarek, secretary of the Financial Institutions Division, described the Banking Almanac as a key statistical reference for policymakers, regulators and researchers, with potential to serve as an early warning tool for emerging risks. Bangladesh Bank Deputy Governor Nurun Nahar said the research-intensive publication could help improve decision-making in the banking sector.
Abdul Hai Sarker, chairman of the Bangladesh Association of Banks, said decisions on interest rate adjustments ultimately rest with the government, while noting that the Banking Almanac is an important guide for investors assessing Bangladesh’s financial landscape.
