Cutting interest rates is not unilateral decision

Bangla Press Desk:  Finance Adviser Dr Salehuddin Ahmed has said that reducing interest rates is not a matter of a single, unilateral decision, as doing so carries the risk of disrupting overall economic balance. 

He made the remarks on Saturday while speaking as the chief guest at the publication ceremony of the Banking Almanac at the CIRDAP auditorium in the capital. The event was chaired by Acting Chairman of the Banking Almanac Dr Hossain Zillur Rahman.

Salehuddin Ahmed said that interest rate cuts are often discussed as an easy solution. However, the reality is that lowering interest rates on one side creates pressure on the economy on the other. If interest rates are reduced without coordination among treasury bills, the banking sector, and the market system, it can have negative consequences for the overall economy. 

Noting that treasury bill interest rates have already declined, he said their impact will gradually be reflected in the market. However, if interest rates on treasury bills or savings certificates are increased, deposits in banks will decline, which would pose risks to the banking system.

He said the core function of the banking sector is to build a bridge between savings and loans. Banks and non-bank financial institutions play this intermediary role. If this structure becomes weak, it negatively affects the entire economic system.

Speaking about the Banking Almanac, Dr Salehuddin Ahmed said that although it does not provide direct investment guidance, it is an extremely important data source for analyzing the banking sector. It includes essential information such as paid-up capital, authorized capital, capital ratios, provisioning, retained earnings, and credit–deposit ratios. 

He added that the continued publication of the Banking Almanac despite various limitations and adverse conditions is commendable. In this regard, Bangladesh Bank, along with the Bank and Financial Institutions Division and the Bangladesh Association of Banks (BAB), has played an important role.

Commenting on the current state of the banking sector, the adviser said that when he assumed office, the sector was in a crisis situation. However, recent data analysis indicates positive signs in provisioning and lending activities at some banks. These changes have been reflected in the Banking Almanac.

On inflation, he said that it is not possible to control inflation through monetary policy alone. Without supply management, market supervision, and cooperation from both traders and consumers, no sustainable solution can be achieved.

Calling on the media, the financial adviser urged them not to portray Bangladesh only in a negative light, but to highlight positive aspects alongside constructive criticism. He also noted that Bangladesh has achieved significant progress despite various limitations.

He said the current government’s goal is not to present unrealistic dreams of turning Bangladesh into Singapore overnight, but to build a strong and sustainable Bangladesh through patience, effort, and collective action. With consistent and gradual work over time, Bangladesh can stand on a stronger foundation.

He added that policymaking must be done by considering the overall national interest, not under pressure for popularity. It is not possible to satisfy everyone when adopting policies, and there is always the possibility of mistakes. Policymaking is not an easy task. Often, popular or populist demands arise—some call for lowering interest rates, others for reducing taxes. Everyone says “me, me,” but no one says “we.” Yet policy is not for one individual; it is for the entire country.

BP/SP