Lower interest rates not always beneficial, govt reviewing policy: PM

Prime Minister Tarique Rahman today (10 June) said reducing interest rates does not always yield positive outcomes, so the government would only consider lowering rates if it clearly benefits businesses and the overall economy.

"Lowering interest rates does not always bring benefits. If, in specific cases, we find that reducing rates will help businesses and the national economy, we will certainly do so", he said while responding to a supplementary question in the parliament.

The prime minister said the government has already undertaken several policy initiatives to boost investment and economic activity, but the positive effects of those measures will take time to materialise.

The question was raised by reserved-seat lawmaker Begum Sabikun Nahar, who expressed concern over sluggish investment, employment and production, arguing that the high-interest-rate policy adopted to curb inflation is discouraging businesses from taking new loans.

Citing Bangladesh Bank data, she said excess liquidity in the banking sector stood at Tk3,78,135 crore at the end of March this year, up 58.3% from Tk2,38,845 crore a year earlier.

She noted that analysts have linked the rise in idle funds to high lending rates, which have reached around 14% in some cases.

As a result, many entrepreneurs are reluctant to undertake new investments or expand existing businesses, affecting employment and economic activity. She then asked what steps the government has taken to address the situation.

In response, the prime minister said, "Business and the economy are areas where the effects of policies are not immediate. It takes time to assess whether a policy is producing positive or negative results."

He also pointed out that Bangladesh Bank recently established a Tk60,000 crore fund to support industries facing difficulties.

"You mentioned Bangladesh Bank statistics after doing research, which is commendable. However, you could also have mentioned that Bangladesh Bank has created a Tk60,000 crore fund. Genuine and credible businesses affected by various challenges will be able to access financing from this fund at a 9% interest rate," he told the lawmaker.

The prime minister questioned why the latest initiative had been overlooked and urged lawmakers to use more up-to-date information in future discussions.

Answering another supplementary question from reserved-seat MP Jahrat Adib Chowdhury, the prime minister announced a new incentive aimed at attracting foreign direct investment (FDI).

He said expatriate Bangladeshis who help bring foreign investment into the country will receive an incentive equivalent to 1.5% of the investment amount.

"We hope this measure will encourage Bangladeshis living abroad to facilitate investment inflows and help attract more FDI," he said, adding that the decision was taken at a meeting held three to four days ago.

Tarique Rahman also said the government has simplified profit repatriation rules for foreign investors.

"One concern among foreign investors was whether they would be able to take their profits out of the country. We have addressed that issue through legal reforms," he said.