Laundered money can’t be brought back overnight: Governor

Bangladesh Bank Governor Ahsan H Mansur has said it is not possible to bring back laundered money overnight.

"It usually takes 4-5 years to bring back laundered money. We will also need time. However, the expectation is that those who come to power in the next government will maintain this continuity. Our responsibility is to initiate this process," he said.

The governor made the remarks while speaking as chief guest at a seminar titled "Bangladesh's Macroeconomic Landscape: Challenges in the Banking Sector and the Path Ahead" organised by the Economic Reporters' Forum (ERF) in the capital today.

The governor said no other economy faces as many challenges simultaneously as Bangladesh does. "There will always be challenges in a country's economy. But, no other country faces as many issues simultaneously as ours."

He said the Bangladesh Bank is currently working on four issues: the external sector, inflation, the rise in money laundering due to irregularities in the banking sector and reforms of the central bank and banking sector.

Citing the limitation of revenue collection as a deep-rooted problem Mansur said, "No government in our country can completely eliminate the revenue problem. We must align our expectations with reality."

He highlighted that weak banks need to be recapitalised to bring them back on track. "We will do this by ensuring 100% security of depositors' funds. Despite many irregularities, Islami Bank has managed to sustain itself due to deposit inflows."

Alongside banking sector reforms, strengthening of the central bank has also been started, Mansur said. "We will transform it into an autonomous institution. The chief adviser has approved this initiative. Within the next three to four months, the proposal will be sent to higher authorities." 

Several aspects of the central bank, including its departmental structure, will change, he said, adding that the Bank Resolution Act has already been drafted and sent for approval.

The growth in remittance inflow helped increase reserves even though the IMF funds have not yet been received, the governor said. 

"This year, we expect to receive $30 billion in remittances, largely due to a significant reduction in money laundering from the country. As a result, despite not selling dollars from reserves, there is no significant pressure on the exchange rate," he said.

Mansur said there is no reason to worry about the external balance and reserves. "We now need to focus on other issues. Once the market stabilises a bit, we will let the exchange rate be determined by the market."

Some aggregators in Dubai are manipulating the system, he said. "The majority of our manpower is in Saudi Arabia, yet more remittances are coming from Dubai. This is because aggregators collect remittances and send them from Dubai."

Noting that the impact of policy rates takes 12 to 18 months to materialise, the governor said, "The treasury bill interest rate has now fallen below 10%, whereas a month ago, it was over 12%. 

"Inflation will also decrease—it has to. From the beginning, I stated that we would bring it down to 7-8%. If it drops below 7%, we will reduce the policy rate. However, I believe the market rate will decline even before that," Mansur said.

The credit growth in the private sector has been slow due to the decrease in deposit growth, he said, adding, "This is because a large portion of the new deposits are being taken by the government. We have urged the government to reduce its borrowing and have asked them to keep their loans within Tk90,000 crore."

Addressing as a special guest, Professor Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue, said, "There is no denying that the country's economy is going through a challenging phase. Such challenges always exist, but I have rarely seen such multifaceted challenges in the post-independence era." 

He continued, "Even during the Covid-19 period, this was not the case. The pressure of people's expectations and the accumulated economic problems are the reasons for such challenges. 

"Expectations like reduced inflation and restored health in the banking sector have created pressure on the government. These expectations of the people cannot be ignored. Overall, the economy is under pressure."

Mohammad Ali, managing director and CEO of Pubali Bank, also spoke at the seminar chaired by the ERF President Doulot Akter Mala and moderated by ERF Assistant General Secretary Manik Muntasir.

'Economists must bear responsibility of govt's success or failure'

Meanwhile, the Bangladesh Bank governor in a separate event yesterday said economists must take some responsibility for the success or failure of the current government, whether they want to or not, because many of them hold key positions within it.

"To survive, everyone must understand something. Economics is also a crucial subject that needs to be learned. We deal with economics every day," he said while addressing the inauguration ceremony of the Bangladesh Economics Olympiad at a hotel in the capital as chief guest.

The governor stressed the importance of extracurricular activities for students, saying, "If we want to develop our future generations, we must advance through small initiatives like these Olympiads."