The New Nation - Internet Edition

Staff Reporter

Bangladesh Bank will do all to absorb the shock of cyclone Sidr and will also release dollar from its reserve for food import, if necessary, Governor Dr Salehuddin Ahmed said yesterday.

The central bank chief urged the banks to forget about making profits this year as the country is passing through a tough time following successive shocks of floods and cyclone.

Dr Salehuddin was talking to journalists after a meeting with the executives of public and private commercial banks.

"It's a very challenging time, a difficult situation for the economy," he said and urged the banks to be aware of the social commitment. "Banks may be able to double their profits in the long run if economic activities can be rejuvenated," he added.

He said the central bank is ready to provide any assistance to raise domestic food production and food imports to face up the food deficit.

Replying to a question he said that Bangladesh Bank is yet to make specific analysis how much pressure would come on the foreign exchange reserve due to food import requirement.

"We'll be able to meet whatever the demand may be," he added.

The central bank has $5 billion in foreign currency reserve right now with which it will be possible to bear import costs for more than three months, he informed.

"We're careful about the food shortage. We're ready to provide any support to keep inflation at tolerable level," he said. However, he expressed Bangladesh Bank's limitation to control other factors that influence the market.

Dr Salahuddin predicted that inflation could rise cross the double digit due to disruption in supply chain in the cyclone-affected areas. Inflation reached 10.10 per cent in Oct from 9.60 per cent in Sept, he added.

He informed that the excess liquidity with banks has to some extent and now stands at Tk 11,000 crore declining from Tk 14,000 crore in June.

"Despite the huge liquidity, the monetary policy remained accommodative in practice instead of the earlier announced cautious policy," he said.

Dr Salehuddin requested banks to provide easy-term loans from the huge liquidity to small economic activities of the disaster-affected people so that they could rejuvenate their economic life and help maintain the country's economic growth.

The Governor instructed them to provide loans to the timber traders and fishermen as well as small housing and agriculture loans in the cyclone-hit areas at lowest possible and tolerable rate of interest.

Private banks having inadequate branches in the affected areas could even link them up with NGOs to operate lending programmes, he added.

Dr Salehuddin called upon the senior bankers to visit the affected areas to supervise lending operations as Bangladesh Bank has been informed that some bank officers were not active enough to perform their duties in consistent with the emergency.

On fears of a fall in GDP growth, the governor said: "It won't fall as ADB and other donor agencies have predicted. In the last fiscal year GDP was 6.5 per cent, this year it might be a little less. But it won't decline below 6 per cent."

"The industry and service sectors are running smoothly. So it won't impact on GDP," Salehuddin said.