The New Nation - Internet Edition

As the International Monetary Fund (IMF) on Monday expressed concern at the soaring inflation in Bangladesh and prescribed some measures to tame it, the Bangladesh Bank Governor refused to yield to the 'pressure' saying, the central bank itself will formulate its monetary policy considering the overall situation in the country.

"We told them that we would make a policy on our own to face the challenge of inflation," the Governor said. He declared the central bank's stance against "contractionary" monetary policy as a strategy to maintain macroeconomic stability as well as growth.

One wishes the central bank governor success in delivering what he promises. Since the budget for the current year is about 30 per cent dependent on borrowing - both domestic and foreign - the demand for fund from the banks has far exceeded their ability to generate deposits. Because of this the weighted average interest on deposits has gone up to as high as 12 per cent. If the banks uphold the central bank’s guidelines to keep the interest rate spread restricted to five per cent then the lending rate comes to 17 per cent which is exorbitant for investors.

Inflation coupled with high interest rates on loans is a great disincentive to investment that is not coming even to the once booming construction sector. People are also unwilling to bring their money to the open by making investment for which they might be answerable. As business confidence is yet to come back to normal, activities even in this sector would take time to normalise, say people involved.

The housing sector used to contribute about 12 per cent to the gross domestic product (GDP) about a couple of years ago and had the potential to increase its contribution to about 25 per cent of the GDP. The national economy could also benefit immensely because the construction sector involves the production and use of as many as 200 items through backward linkage, say housing experts. Performance of the sector is now at its lowest level, say real estate developers.

Backward linkage industries and businesses that developed with the construction sector over the years include: rod and steel, cement, paint and colour, glass, tiles and ceramic, furniture, kichen accessories, sanitary -ware, electric cables and appliances, architecture, construction firms, interior design firms, security services and the like.

Due to price hike of commodities the price of rod, the key raw material in construction works, has almost doubled. Similarly, the prices of cement, bricks and other raw materials have also gone up putting a brake on the growth of the sector. Against this backdrop, some irresponsible utterances like, 'none can say when prices will come down’ are only encouragements for people to ask for even higher prices.

When talking about creating jobs as a first step, efforts should be made to revive the construction sector that involves the use of as many as 200 items. Such efforts would help salvage many linkage industries and this would also increase the overall performance of the economy. Other steps must also be taken, so that people have money in their pockets to deal with family financial crisis. No bookish knowledge is any good when general public cannot meet daily requirements to survive. The people also do not see tightening of belts by persons in the government. They have no difficulty in enjoying good life with people’s money. They face no difficulty in raising the income. As people’s government people’s hardship must be taken seriously. So, we suggest to do everything to allow the construction sector to be active by creating jobs for the poor and the unemployed ones.