‘Implementation to be difficult in existing model’

The implementation of the market-driven exchange rate will be difficult in the existing model, said economist Zahid Hussain, suggesting that the central bank seek an alternative model.

The Association of Bankers, Bangladesh (ABB) and Bangladesh Foreign Exchange Dealers Association (Bafeda) have been fixing the exchange rate of the US dollar since last year.

"I suggested that the central bank ask the ABB and Bafeda to stop fixing the exchange rate," Zahid Hussain, former lead economist of the World Bank, Dhaka office told The Daily Star after a meeting with the central bank.

Central bank officials yesterday met with Hussain as part of their move to seek opinions from local economists on how to address current economic challenges.

Abdur Rouf Talukder, governor of Bangladesh Bank, and other senior central bank officials were present at the meeting, where Md Habibur Rahman, chief economist of the central bank, presented a paper on the country's economic condition.

"The Bangladesh Bank should allow banks to negotiate with suppliers for the collection of US dollars but if it is not possible at this moment, then the regulator can fix an exchange rate corridor with lowest and highest rates," Hussain said.

"The central bank said they will consider it and think of an alternative model for fixing the exchange rate."

Hussain said there were three challenges facing the economy: inflation, the forex crisis and distressed assets in the banking sector.

He said that the central bank will have to work to address the exchange rate policy, interest rate policy and also to reduce distressed assets in the banking sector.

The economist presented a paper with his suggestion at the meeting.

The central bank presented a summary about the initiatives that they have taken to tackle the foreign exchange crisis, control inflation and reduce distressed assets in the banking sector.

"The central bank wanted to know my views in this regard," he said, adding that the challenges identified by the central bank were similar to those he had himself identified.