DS: The govt is receiving mixed reaction regarding the recent domestic fuel price hike following increasing fuel prices internationally. What impact do you think this hike is going to have on Bangladesh economy, which is seemingly sensitive to oil price movement? What measures do you think Bangladesh should adopt to mitigate any negative impact on the economy?

MR: The govt has done a right job by increasing the fuel price and they should drive this as a continuous process. Our fuel prices are still below as compared to our neighboring countries, a fact that is encouraging smuggling for many years. The wide gap between international and domestic price of fuel has led to a loss of around BDT 27 billion for the state owned Bangladesh Petroleum Corporation (BPC) in the last fiscal. The age of subsidy is bound to come to end (especially to the wrong segment of the market), only the sooner the better. More alarming is the fact that with the increased price of fuel in the international market Bangladesh will be required to pay more than USD 2 billion in foreign currency in the current fiscal year which is almost double than the previous fiscal, with tremendous pressure on our already fragile forex reserve. Oil itself any way has become like trading currency. Any political turmoil or major international disturbances influence it. It has become so sensitive. Though I am hopeful (rather praying for Goldman Sachs' prediction for fuel price to go up to $ 100 per barrel to be proven wrong) that as the international price stabilizes and if comes down to $50 it will reduce the current crisis to some extent. Given the scenario I believe that this recent hike will not have a major negative impact on our economy provided the govt. supports the price increase with required policy measures. The farmers who reportedly use diesel (the highest value drainer, diesel occupying almost 62 percent of our imports) can be subsidized through a structured program. Octane and Petrol price (which in fact is subsidizing the wrong section of the market with questionable contribution to the national exchequer) should immediately be increased to India and Sri Lanka level, if not Myanmar. Minimum 1 dollar per liter has become almost a standard. I would like to commend the govt. on the recent steps it is contemplating, like having two days holiday. This coupled with bolder steps like shutting down shopping malls after 7pm as is the practice in many countries, will help to control fuel usage. The social impact I believe would not be negative. Provided the fact that failing to visit markets on working days people will grow the habit of going to malls on weekends. This will minimize the losses of the retail traders. In addition I strongly believe the govt. should take steps to encourage the use of natural gas instead of oil (where applicable) in the industrial sector to reduce dependency on oil and continuous conversion of transports to CNG should continue, with expansion of CNG facilities network.

DS: The govt's recent contractionary monetary policy is being driven by the intent to increase the lending rate in the financial market. How do you think this is going to impact the investment scenario of the country?

MR: Any increase in the domestic markets lending rate influences the investment in the short run. The internal rate of return( IRR) of many projects will be affected due to the higher financial cost. But this is from a short run perspective. I believe Bangladesh economy has the capacity to absorb higher interest rates. One prime example is the micro finance institutions. Their average lending rate is much higher than commercial banks, yet their positive impact on our economy, especially at the `bottom of the pyramid' is now internationally respected. But again govt must be cautious not to hinder investment in priority sectors like power, infrastructure etc. Sectors like agriculture already enjoys preferential rate. The growth of other priority sectors must also be protected from declining. Financial sector should be made efficient to serving the cause of their clients quick. Side by side, govt. also should increase rate of treasury bills, other wise the policy of increasing CRR/SLR might be deemed as govt's clever move to support govt's financing cheap, vis-à-vis mopping up excess liquidity as a part of contractionary monetary policy, as mentioned.

DS: There are widespread apprehensions regarding the recent domestic political developments and FDI scenario. Do you think it is going to have any serious impact on the FDI inflow in the country?

MR: In recent times Bangladesh has seen increased direct investment interest from global corporations like TATA of India, Luxon Global of Korea and so on. Things were going fine for the FDI scenario. However any domestic turmoil or disturbances are not a strong reason to impact FDI flows in any country. It has got everything to do with the image of the country abroad. Investors are influenced by the image as projected in international media. An investor sitting in India, Korea, Latin America or Europe watches CNN, reads Newsweek, Financial Times, The Economist or New York Times. Images portrayed there really build the profile, which matters. As I understand the govt has enormous responsibility to protect and uphold the image of the country abroad. The recent bomb attack throughout the country has no doubt shaken the country internally, and internationally our image is also challenged. This must be dealt with caution and firmness. This is a golden opportunity to show our commitment to building a terrorist free regime by uprooting terrorism and sends the right message to the int'l community. Two days of weekend, especially on Saturdays and Sundays and 'stoppage of hartal' (strikes) can also help in this direction. Again the message has to be properly communicated and projected through international media. Apart from that many countries so far has faced bomb attacks. Compared with other places the severity of Bangladesh bomb attack is lesser. So far no major negative impact on FDI scenario has been observed. I believe it is high time we come out of blame game scenario and work together to build a right profile for the country. The existing multinational companies operating in the country can be used as 'good will ambassador' in this respect.

DS: The recent drastic devaluation of taka against USD has been a major source of concern and has also spurred a lot of debate. As a senior banker please express your views on this.

MR: Perhaps the most debated issue of the recent time is the issue of Dollar crisis in the local market and the resultant devaluation of taka against dollar. The govt is frantically searching ways to curb the taka devaluation and resultant inflation. In my opinion especially the inflation scenario is yet to be alarming which recorded to be over 6 percent in FY2005. In the countries like Pakistan and Srilanka inflation is as high as 12 percent and 16 per cent respectively. The govt. following IMF suggestion has also adopted contractionary monetary policy to curb inflation and to tighten their grip on the continuously devaluating local currency against USD. This may show some result in the short run but what the Govt. should focus is to look for a long-term solution to our forex reserve problem. We currently have a remittance flow of USD plus minus 3.5 billion, while the market is estimated to be USD 7 billion. It is high time govt focuses on policy measures to increase the inflow of Remittances from Bangladeshi expatriates by giving special incentives. Some encouraging measures can be thought upon for exporters also. As I mentioned earlier by reducing pressure on balance of payments through reducing oil imports and focusing on export growth Taka depreciation can be curtailed. Rather than mourning on setbacks the govt. should focus on growth areas. Bangladesh economy has proved to be stronger than it is appreciated for. It has been proven by the fact that in spite of widespread fear about post MFA impact Bangladeshi exporters fetched USD 1 billion more in the last fiscal than the previous one, which is a tremendous growth. We should build on our strengths.