High inflation to persist in Bangladesh: World Bank

Inflation is likely to remain elevated in the near term and pressure on the external sector is expected to persist in the Bangladesh economy in the 2023-24 fiscal year, depending on global conditions and domestic exchange rate, monetary and fiscal policies, a World Bank top official said today.

The high inflation may gradually subside, as import prices stabilise over the medium term, said Abdoulaye Seck, country director of World Bank for Bangladesh and Bhutan.

"We have already seen this forecast materialising in data from the past two months, which show weak performance in export earnings and remittance inflows," he said.

He made the comments at the regular luncheon meeting of the American Chamber of Commerce (AmCham) in Bangladesh at the Sheraton Dhaka in the capital.

In the near term, policy adjustments can help stabilise macroeconomic conditions, he said, adding the additional exchange rate flexibility will incentivise migrants to send remittances using formal channels and will encourage repatriation of export earnings.

"To help contain inflation, the transmission of monetary policy can be strengthened, including phasing out the use of interest rate caps on lending."

"At the same time, financial sector vulnerabilities need to be addressed through effective bank supervision. Recent monetary policy updates are a step in the right direction, but a faster pace of implementation is needed," he said.

Syed Ershad Ahmed, president of the AmCham, also spoke.