‘This loan will help stabilise the market’

Do you think Bangladesh did the right thing by seeking the loan?

I believe the government has done the right thing by seeking this loan. In order to stabilise the market and restore people's confidence, this will be very helpful. 

When giving out loans, the IMF suggests policy changes, and we desperately need some policy changes (both monetary and fiscal). So we will also have to work on our policies.

For example, the IMF might suggest removing the interest rate cap, in my opinion this is do or die; otherwise, we can't control the exchange rate. We have to increase the interest rate a lot, even if it is for a short time. We can  increase it for a few months and gradually bring it down. If we can negotiate the program with the IMF quickly, market stability will return. 

Keeping the past track record in mind, the IMF might ask the government to withdraw subsidies. Are we in a situation to make such a decision ?

Withdrawal of subsidies will be a bit tricky. In the energy sector, a reform has been long overdue. Even though India has reformed their energy pricing strategy, their government no longer controls energy prices there - instead it is dictated by the market situation. Every week the price changes and the market fluctuates; we can also try that. 

The time, however, is not good. When prices were lower, it should have been done then, if it was done at that time, prices would have gone up gradually and it would not have been a political issue. 

When it comes to agricultural subsidies, I believe there will be partial solutions. Some subsidies should be withdrawn, but some should remain. 

For example: rice prices are quite high now so why shouldn't fertiliser prices increase? We are still selling them at the rate we used to sell them at when the dollar prices were much lower.

If people get fertiliser for too cheap, they might not value it, and potentially go on to waste it. This subsidised fertiliser will also be smuggled to neighbouring India because fertiliser is not as cheap there. If we buy it for TK120 we have to sell it for at least Tk50, which is still a big amount of subsidy.

Resetting the methodology to report on foreign currency reserves might be one of the conditions; what can be the impact of such a move?

The impact of redesigning the methodology we use to report on foreign reserves is that our reserves will decrease by $7 billion. Some funds that the governments consider available will have to be removed. For example, the money Sri Lanka owes us needs to be removed since we no longer have it. 

It is nothing too difficult however. The major issue is we have to make the dollar exchange rate more market-based and some of the subsidies need to be removed.