Developmental central banking key to Bangladesh’s faster recovery
The developmental central banking helped Bangladesh overcome both global financial crisis and the ongoing pandemic as it tried to pursue multiple targets with multiple instruments. Inflation targeting was not its only job. It touched the ground and worked for many. Dr. Atiur Rahman, former Governor of Bangladesh Bank said this at a special discussion meeting organized by the Nepal Rastra Bank at the hotel Marriot in Kathmandu yesterday (26 November). Chaired by NRB Governor Mr. Maha Prasad Adhikari the program was also participated by Dr. D. Subbarao, former Governor of Reserve Bank of India. This program was organized by Nepal Rastra Bank to share knowledge on central banking with its high officials including Deputy Governors, Board Members, Executive Directors and Directors.
Dr. Rahman in his presentation further said that the central banking in Bangladesh is well known for its innovative programs like financial inclusion, promotion of agriculture and SMEs, women empowerment through refinance, green finance and supporting the government with enough money by expanding its own balance. Its environment, social and governance risk management policy has been pioneering in the world to address climate change. While doing all this it never forgot its main job of inflation control as well. A strong financial sector also helped Bangladesh reach the bottom of the social pyramid to promote social protection and the real economy. The digital financial services through mobile financial services and agent banking proved critical in early recovery of Bangladesh from the pandemic. This policy worked for many and not a few.
The early policy moves including a huge stimulus package of nearly five percent of GDP helped distressed people cope with the crisis and provided cushion during the shocks. The sustainable finance policy of Bangladesh’s central bank will surely reinforce longer-term climate-friendly initiatives of the government, said Dr. Rahman. He said the central banking in Bangladesh has proved that developing countries must avoid the policy of ‘one size fits all’ and broaden its focus beyond inflation targeting to support broad-based development processes. For that matter the drive for digitization must continue along with remaining committed to ‘learning by doing approach’ which has been paying Bangladesh so well.
Dr. Subbarao said that Bangladesh central banking has been led by its leadership with heart and not only head in promoting innovations. While talking about his own experiences Dr. Subbarao emphasized on credible, down to earth and precise communication by the central bankers to give right signal to the markets.
He also favored financial inclusion and making central bank a knowledge institution. The Nepalese Central Bank Governor welcomed knowledge sharing among the central bankers particularly in the wake of the pandemic which has created so many challenges for the economy. He also called for more connectivity and bilateral cooperation in the subregion.