Bangladesh’s central bank is set to raise interest rates to 9% in the coming days to combat rising inflation, according to the bank’s chief in an interview with the BBC. The move comes as the South Asian nation grapples with economic challenges worsened by global financial trends and domestic pressures. The central bank governor emphasized the need to manage inflation to ensure economic stability and growth.
“This decision aims to control inflationary pressures and stabilize the currency,” he said, asserting that the rate hike is a necessary measure to maintain economic balance. Inflation in Bangladesh has been a growing concern, affecting prices of essential goods and impacting the daily lives of its citizens. By raising interest rates, the central bank hopes to tighten monetary policy and curb the rising cost of living.
Bangladesh’s central bank building, an iconic structure in the capital city of Dhaka, stands as a symbol of the country’s financial ambitions. However, recent economic indicators have signaled the need for decisive action to sustain growth and stability.
Combatting inflationary pressures
This rate hike also aligns with global financial trends where central banks are adjusting interest rates to deal with inflationary pressures. Observers will be closely watching the impact of this move on Bangladesh’s economy in the coming months. The country is also seeking USD 6.5 billion in financial support from international agencies to stabilize its economy.
This includes USD 3 billion from the IMF, USD 1.5 billion from the World Bank, and USD 1 billion each from the Asian Development Bank and the Japan International Cooperation Agency. Political unrest has further exacerbated Bangladesh’s economic woes, severely impacting garment exports, a key component of the economy. The new interim government, led by Nobel laureate Muhammad Yunus, is committed to implementing comprehensive reforms before the next general election, which may not take place for another three years or more.
The central bank governor also expressed concern about the country’s banking sector, citing widespread flight of deposits and a sharp increase in non-performing assets linked to defaults by business groups allegedly associated with the ousted Awami League government. Efforts are underway to recover stolen funds and restructure the banking system. Bangladesh faces significant economic and political challenges that require urgent and coordinated action from both domestic and international stakeholders to ensure stability and foster sustainable growth in the country.
