Political support and a strong Bangladesh Bank are crucial to deal with the challenges, including high non-performing loans (NPLs), in the banking sector, said Mustafa K Mujeri, a former chief economist of the central bank, yesterday.

"Introducing policy measures is not enough -- the central bank will have to implement the policy to bring governance to the banking sector," he told The Daily Star after a meeting with the BB high-ups.

Senior central bankers met with Mujeri, also the executive director of the Institute for Inclusive Finance and Development, and Binayak Sen, director-general of the Bangladesh Institute of Development Studies, as part of their move to take opinions from local economists and think-tanks on how to ride out the current economic challenges.

Abdur Rouf Talukder, governor, and Khairuzzaman Mozumder, the finance secretary, were present at the meeting, where Md Habibur Rahman, chief economist of the BB, presented a paper on the prevailing economic situation.

The meeting discussed issues ranging from higher inflation, falling foreign currency reserves, the exchange rate to the governance in the banking sector and NPLs.

Mujeri said that the central bank officials highlighted the current economic scenario and the policy measures they have taken to tackle the crisis.

"We suggested the central bank take strict measures to reduce NPLs."

In June, NPLs totalled Tk 156,039 crore, representing 10.11 percent of the disbursed loans in the banking sector, central bank figures showed.

"There has always been governance problem in the state-run banks. Now a major portion of private commercial banks are also facing challenges due to a lack of good governance," the economist said.

He urged the central bank to take separate measures for both state-run and private banks.

Mujeri said the monetary policy would not be enough to tackle the inflationary pressure. "Strict monitoring on the market is also needed."

"We suggested integrated measures, including monetary measures and fiscal measures, to rein in the inflationary pressure."

In order to get rid of the forex market volatility, the economist suggested a market-driven exchange rate of the US dollar.

He also called for short-term and long-term measures.

"The short-term measures will have to be implemented before the national polls."