Economists warn at CPD dialogue; Rehman Sobhan terms stockmarket a casino
The ongoing crisis in the sharemarket might affect other areas of the economy that faces the risk of high inflation and volatility in the forex market, economists have warned.
They suggested capital market reforms and strong monitoring by Bangladesh Bank to curb excessive credit expansion.
The economists made the observations at a dialogue on challenges for Bangladesh in fiscal 2010-11 in the context of growth, inflation and the monetary policy. The Centre for Policy Dialogue (CPD) organised the programme at the Cirdap auditorium in the capital.
They pointed to “greed” of investors as the main reason behind the sharemarket bubble and said a subsequent plunge in share prices has put pressure on the financial sector with a portion of bank credit being diverted to stock investment from productive sectors.
The economists feared an excessive expansion of credit might result in a “financial crisis”.
But BB Governor Atiur Rahman said the central bank will not allow any breach of discipline in the financial sector.
“Our main goal is to maintain macroeconomic stability. We will ensure discipline in the financial sector at any cost,” said Rahman, advising stock investors to cut dependence on bank loans. “The investors have to depend on their own equity.”
CPD Chairman Rehman Sobhan said there is significant inadequacy in the design of the monetary policy.
“You have created a system of capital market and financial intermediation, which is really not a capital market. What we have in Bangladesh is a casino in the name of capital market,” he said.
“You are having people running into the market in a totally crazy way, which is unrelated with the price earnings ratio,” said Sobhan, who presided over the discussion.
Mustafizur Rahman, CPD executive director, Ahsan Mansur, executive director of Policy Research Institute of Bangladesh, Salehuddin Ahmed, former BB governor, Ziaul Hasan Siddiqui, BB deputy governor, and Sanjay Kathuria, World Bank’s lead economist in Bangladesh, also spoke.
