Inflation to fall to 7.0pc by Sept

Bangladesh Bank Governor Ahsan H Mansur on Tuesday expressed hope that the rate of inflation would fall to 7.0 per cent by this September, paving the way for lowering the policy interest rate.

He said there were two big challenges - inflation and the money market.

Now the inflation has started to ease, while the exchange rate has also become stable, he told a post-budget press conference at the Osmani Memorial Auditorium in the capital.

Finance Adviser Dr Salehuddin Ahmed, as well as other advisers and government officials, were also present there.

Mr Mansur said concern has been expressed over whether inflation would fall to 6.5 per cent by the end of the next fiscal year as per the target set in the budget.

"I personally think that it [the rate] should go down further," he said.

He also said the rate was fixed conservatively.

"This is because we have almost successfully passed the main challenge. Our main challenge was stabilising the exchange rate because until we could stabilise the exchange rate, we may not be able to win the fight to cut inflation."

The central bank governor said with the volatile exchange rate, the prices of goods in the domestic market would have increased further due to the rise in the international market.

"Since the exchange rate remained at Tk 122 or Tk 123 during the last seven to eight months, we got some relief. Even after introducing the market-based exchange rate, the prices remained stable. Thus confidence has come that inflation is going down," he added.

Mr Mansur further said experience shows that food inflation has decreased from 14.5 per cent to 8.5 per cent, while non-food inflation reduced from 11.5 per cent to 9.25 per cent.

"We are hopeful that the rates will go down faster."

He said he was hopeful that the forex availability would stay well-positioned and "we are keeping monetary policy tight and we will lower the policy interest rate when inflation goes down below 7.0 per cent. We are hopeful to go there by September."

At the press conference, Power, Energy and Mineral Resources Adviser Muhammad Fouzul Kabir Khan said the proposed budget has put much emphasis on reducing unnecessary expenses and disparities.

"There was VAT on liquefied natural gas (LNG) import. This value addition was negative as we import gas for Tk 60-65 per unit and sell it for Tk 30. This value addition was unnecessary. Reform has been brought here in the proposed budget," he said.

He said the government has reduced the prices of liquefied petroleum gas (LPG) and fuel, which would pave the way for lowering transport and production costs.

syful-islam@outlook.com