The country's apex trade body Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has opposed a proposal, put forth by economists and bankers, for lifting the existing interest rate cap – 9% on lending and 6% on deposits.
"I disagree with the demand for lifting the interest rate cap," FBCCI President Md Jashim Uddin said at a programme on the macroeconomic situation in the capital on Sunday.
"If the cap is lifted, interest rates will rise to 16-17%. Then how will the new investment come?" he added.
Participating in the event, Policy Research Institute Executive Director and Brac Bank Chairman Ahsan H Mansur and South Asian Network on Economic Modelling Executive Director Selim Raihan earlier talked in favour of the withdrawal of the cap or raising interest rates for at least a certain time.
"I urged the government to lift the existing cap on bank deposits and lending rates at least for a certain time. Such a generalised interest rate cap cannot now be found in any civilised country," Ahsan H Mansur said.
"If the government is reluctant to lift the cap, it should raise the interest rates," Selim Raihan added.
While presenting the keynote at the event, organised by the Bangladesh-Malaysia Chamber of Commerce and Industry (BMCCI), he said that raising deposit and interest rates would be very logical now.
The programme titled "Anatomy of a macroeconomic crisis" also discussed various issues, while Salman F Rahman, prime minister's private industry and investment advisor, Haznah Md Hashim, Malaysian high commissioner in Dhaka, Mamun Rashid, country clients and markets lead at PwC Bangladesh and Syed Almas Kabir, BMCCI president, were present.
Haznah Md Hashim said bilateral trade between Bangladesh and Malaysia would increase substantially if a free trade agreement is signed. He also emphasised addressing the existing trade barriers and creating a favourable tax policy.
On the trade deficit of the country, Selim Raihan said exports should increase keeping pace with the rise of imports, but it has not been happening now. He raised the question of whether it is a form of illicit money transfer.
On the volatile dollar market, Ahsan H Mansur said there is speculation that a group is taking money from banks to buy dollars, which is one of the reasons behind the rise in the dollar exchange rates.
With the Tk26 increase per dollar so far, the government will have to spend an additional Tk1.8 lakh crore to repay its foreign debts, while the private sector needs to pay Tk65,000 crore extra, he added.
Ahsan H Mansur also suggested the government reduce subsidies on fertiliser.
Mamun Rashid said drawing foreign direct investment to Bangladesh is tough now. "If the host country's entrepreneurs do not come [with new investments], foreign investors will also show reluctance."
He suggested an overhaul for increased flow of foreign investments.
Salman F Rahman said when the bank lending rate hovered near 14% it was believed that the higher amount of non-performing loans was the reason behind the high-interest rate. "Then the government fixed it [imposed interest rate cap], but non-performing loans did not decrease, which means the belief was not true."
Mentioning the country's rapid progress over the past years, the prime minister's advisor added that the government subsidy on fertilisers contributed greatly to the country's self-sufficiency in food.
On the IMF loan sought by the government, he said it is a precautionary measure. "Any sensible government will take such a step."