No possibility of inflation from govt borrowings: BB governor

Bangladesh Bank Governor Abdur Rouf Talukder today (June 2) ruled out any possibility of creating inflation in the country from the target of government borrowings, including bank borrowings, set in the proposed budget for the next fiscal year (FY24). 

"Currently, the inflation in the country is not because of the supply side; rather, it is absolutely imported inflation," he said. 

The central bank governor said this while replying to a question during the post-budget press conference held at the Bangabandhu International Conference Center (BICC) in the capital, Dhaka, this afternoon. 

Out of the total budgetary outlay of Tk 7.61785 trillion for FY24, the budget deficit has been estimated at Tk 2.61785 trillion, of which Tk 1.32395 trillion will come from the banking sector. 

Rouf also told a questioner that the central bank would not try to contain inflation by printing cash notes, and there is no such possibility. 

He informed that the central bank would deliver the monetary policy statement on June 18, where there would be details about the measures for containing inflation. 

The governor said that there would be supply-side intervention in the budget so that inflation remained under control. He said that although a huge amount has been spent on payments of interest and subsidies, it will not have any impact on controlling inflation. "Besides, there will be no such austerity in utilising the ADP."

He said that the country would be able to meet the import bills for five months with the current level of foreign currency reserves. 

"Our main task is now to make the financial account positive, and hopefully it will be in a stable state within a few months. Then the foreign currency reserve will increase gradually," he added. 

When asked about the measures in the budget for improving the financial sector, Rouf said that the draft of the amended Bank Companies Act has already got approval from the cabinet and will be placed in Jatiya Sangsad, while the draft of the Secured Transactions Act will also go into Jatiya Sangsad. Besides, the draft of the Insolvency Act is at the final stage. 

The governor of the central bank said efforts are on to bring down the NPL trend at the private banks to 5 percent and that of the public banks to 10 per cent.

"We've already identified some problematic banks and taken corrective measures. Whatever erosion has taken place will be addressed in phases,"

Asked about the measures for improving the stock market, the governor said that some 3 to 4 major policy issues have been solved over the last year, and the central bank has extended the necessary policy support in this regard. 

But now it is high time to develop the bond market, whether or not the central bank has been extending necessary support to the BSEC in this regard, he added. 

Responding to another question about the possibility of attaining the government's target of a 75 per cent cashless society by 2027, Rouf said that some pilot schemes are being implemented in this regard, while an interoperable platform is also being developed alongside the unique QR code and national debit card. 

The governor said that the digital bank initiative in the country would be entirely virtual and would help to establish a digital society as almost 60 million people in the country now use smartphones.

"Once a digital bank is established, it will increase the pace of transactions, and thus it will be possible to attain the target by 2027," he added.