Dhaka, Feb. 26 -- The monetary policy statement (MPS) for the second half of FY2023-24 was recently unveiled by the governor of Bangladesh Bank (BB). With a disillusioned nation suffering from severe economic hardships, this was certainly a difficult task which was made even more difficult by the International Monetary Fund (IMF) breathing down his neck to ensure compliance with its conditionality. It was important to appear to be diligently working for compliance since some conditions for the continuation of the IMF loans were not met before the last meeting.

The standard monetary policy response to a situation such as the one Bangladesh is in is monetary contraction, which involves raising the policy interest rate. This is expected to ...