Inflation expected to drop to 5% by end of 2025: BB governor

Highlights

• Inflation expected to fall to 8% by June, 7% by August, and 5% by end of 2025
• Targeting 3–4% inflation to support a stable exchange rate
• High inflation makes exchange rate stability difficult
• Aims to match India and US inflation levels (2–3%)
• Macroeconomic reforms are essential to maintain currency stability

Bangladesh Bank Governor Ahsan H Mansur today (22 May) expressed optimism about the country's inflation outlook, predicting a significant decline to 5% by the end of this year.

"In June, the inflation rate will fall to 8%. By August, this rate will come down to 7%. We expect it to reach 5% by the end of 2025. If inflation can be brought down to 3-4%, it will then be able to support the exchange rate," he said.

The governor made the remarks while speaking as the chief guest at a roundtable discussion titled "Application and Impact of Market-Based Exchange Rate," organised by the daily Bonik Barta at a city hotel.

Mansur said there is a critical link between inflation and exchange rate stability. If the inflation rate remains high, it becomes difficult to keep the exchange rate stable, he noted. 

He said, "We need to bring the inflation rate down to 3-4%. The rates in India and the United States are at 2-3%, and we must reach that level. If my inflation rate remains 9.5% for the next two years, how can I hold the exchange rate? 

"If I cannot fix the macroeconomic situation and the overall balance of payments (BOP), then I cannot maintain the exchange rate." He added that the balance of payments has significantly improved compared to before."

The governor also announced that "major intervention will come next year, and banks will be recapitalised."

Addressing concerns about market intervention, Mansur said, "Many have asked me to send inspections to banks, but I have not agreed. I believe that the $500 million market intervention fund that has been formed will not need to be used. I will keep it, but it's not a must to use it. Just because you have a sword and shield in hand, does that mean you have to kill people?"

Mansur dismissed notions of import compression, stating, "We are still importing the same amount of commodities as before. The difference is that global market prices have decreased, which is helping us. I am not in favour of restricting imports. If someone wants to use luxury goods by paying taxes, I have no problem with that."

He urged banks to "try to develop the forward market" and advised businesses to "calculate exchange rate risk." He suggested that if deferred payments seem risky, businesses should opt for spot payments.

Highlighting the issue of capital flight, the governor lamented, "Hundreds of billions of dollars belonging to Bangladeshis are held abroad. We are making ourselves poor. They keep it abroad for asset security. If we cannot maintain this security, capital flight cannot be stopped."

He went on to say, "As much as Tk2-2.5 lakh crore has left the country. This will certainly have an impact on the country. This is why deposit growth is not happening despite offering high rates. Because the money is not in the country. We must solve this by building up our forex reserves."

Mansur reiterated, "I want to say again, the exchange rate will be determined in Bangladesh, not in Dubai or any other country. No aggregator can hold dollars for more than five working days."

Urging remitters not to fall into the trap of speculation, he said, "I would urge all remitters not to speculate. The dollar rate will not suddenly increase significantly. You can send money to your families if you wish. Sending it later will not bring much benefit."

Encouraging banks to focus on long-term customer relationships, the governor said, "I would tell banks to go to schools. If you can create a customer from there, they might become your lifelong customer if the service is right. They will become remitters in the future and send remittances through your bank."