Cut interest rates, bring in good companies to revive the stock market

To boost the country's economy, changes must be brought to basic policies. Inflation has not been controlled anywhere in the world through contractionary monetary policy. Yet we are currently following this very policy. We need to move away from it and adopt an expansionary monetary policy.

If monetary policy changes, the country's capital market will also get a boost. At present, the interest rate on treasury bonds is 11% to 12%. With such rates, the capital market can never improve.

All the major investors in the capital market have now invested in treasury bonds or bills. They are getting good returns without any risk—so why would they come to the capital market? If interest rates are reduced, that investment will shift to the capital market.

About 37% of the shares in the country's capital market are still undervalued. But due to a liquidity crisis, there is no investment in those shares.

To improve the stock market, interest rates must be reduced—there is no alternative. At the same time, some good companies must be brought in. If these two things are done, the capital market will certainly improve. Expectations about the market must also be raised.

Expectations will be created only when there is hope that the economy will improve, the value of the currency will remain stable, and exports will increase.

But at present, those conditions are not in place.

Exports are not growing as much as they should, although this is not entirely in anyone's control. The value of the currency has become somewhat stable. If a new government is formed through elections, hope will be created that the economy will improve.

After political changes, the operations of many large groups in the country have been disrupted, which has affected the supply side. I always say: punish individuals, not institutions. Individuals who committed crimes must be punished. But give relief to their factories. Thousands of jobs are linked to a single institution. You cannot set up factories overnight. The ones that exist should not be shut down.

There is disagreement regarding monetary policy. It has to be expansionary. The supply side must be fixed. The government must sit with businesspeople. If interest rates are reduced, businesses will expand and investment will increase. Nothing will happen to the economy with a growth rate of three and a half percent. Unemployment will rise. Massive investment is needed for this.

Whether domestic or foreign, investment is essential. For that, interest rates and the repo rate must be reduced. To boost the economy, changes must be brought to basic policies. Inflation must be controlled by boosting the supply side.

If investment increases, the supply side will be boosted. Inflation has not been controlled anywhere in the world through contractionary monetary policy. Pakistan could not do it, Nigeria could not do it, and neither will we. An expansionary monetary policy is required.

How did ICB reach such a bad situation?

Officials were involved. With the cooperation of some people in the market, they bought shares of poor-quality companies. One quarter of the shares in ICB's portfolio are junk. Out of a portfolio worth Tk13,000 crore, there has been erosion of Tk5,000 crore.

ICB's major losses occurred mainly during the period when block market trading was active. Although block trading is now closed, ICB now has to buy shares from the secondary market. Junk shares entered the portfolio due to the influence of powerful individuals. By building close relationships with officials, they sold their shares to ICB.

Some of those who worked with market manipulators in these activities have retired, while those still in service are under investigation. The Anti-Corruption Commission (ACC) is investigating these matters.

ICB had invested nearly Tk1,000 crore in leasing companies, including Padma Bank. Now it is not getting that money back. In addition, money was given to several other institutions, but it is not being recovered. As a result, ICB has become stuck.

Government provided Tk4,000 crore

The government provided Tk4,000 crore in two phases—Tk3,000 crore in the first phase and Tk1,000 crore in the second phase. From the first Tk3,000 crore, loans worth Tk2,000 crore were repaid, and Tk1,000 crore was invested in the capital market.

There is no mentality of taking stop-losses. When there is a loss, they do not want to sell. The board has approved that shares must be sold even at a loss, but they are not doing it.

There is no smartness in ICB's investment strategy. Sometimes, to buy shares at a lower price, shares have to be sold even at a loss—but they do not do it. They simply do not want to.

Why are you asking the government for money again?

We are asking the government for money to keep the institution alive. If money is not given, the institution will not survive. But ICB is necessary to support the market.

Although the government initially did not want to provide funds, after giving Tk3,000 crore the first time, it again provided Tk1,000 crore at 5% interest.

The money provided by the government has not resulted in losses through investment. The losses of the institution had already occurred earlier. Now it is only being managed properly.

We are investing the money received from the government only in 'A' category company shares. Even if there is no capital gain, the year-end dividends will still generate some profit for ICB.

Small amounts are being invested from this fund every day. ICB officials are also happy because at least they are making profits on the money received from the government.

Attempts at pumping and dumping are still ongoing around ICB. Some groups in the market try to influence officials to buy shares, but because I remain firm, that is not happening. As long as I am in this position, I will not allow any pumping or dumping. Pumping and dumping are not happening now, but the damage that occurred earlier has already been done.

At present, the government is very rigid. The growth rate is low and unemployment is increasing. In this situation, money must be put into people's hands. The repo rate must be reduced, and interest rates must be lowered. If these are done, the country's capital market will revive.

The chief adviser has given some directives regarding the capital market, and those are correct. He has been able to identify the problems. But none of them have been implemented.

Have government companies come to the capital market? There have only been meetings after meetings. I know nothing will happen through these. In this country, unless you are strict, no one will come.

Unilever does not want to come to the capital market. But if the government or the NBR chairman had invited them for tea and said either offload 5% of your shares or face additional taxes, then they would have come.

If that is not done, then they should be asked under what conditions they would come to the capital market. There is no leadership in the system capable of bringing them in. That is why not a single foreign company has come.

Not only foreign companies—even state-owned domestic companies have not come. Because they also do not want to come. They are not serious about entering the market. In the case of bringing government companies, the initiative has been limited to meetings only. I am not optimistic. They will not come either.

Seventy percent of leasing companies have no income. Even if banks are saved, who will rescue these companies? Altogether, the capital market is shrinking. How will the capital market grow? Foreign investors are leaving.

At present, expecting the capital market index to reach 5,000 or 5,500 points is foolish. When the next government comes, they may address these issues. Then there may be some revival. ICB will be evaluated separately.

Managing the economy was much easier 20 years ago, but it will not be easy now. At that time, balancing the balance sheet was much simpler. For any government now, managing the economy will be a Herculean task. With courage and political backing, the country's growth must be raised to at least 5.5%.