Panam Institute welcomes the publication of the latest Monetary Policy Statement by the Bangladesh Bank on 30th September 2026, for October-December 2026 period, and the decision to move to quarterly MPS. Publication of quarterly MPS is a significant improvement in the way monetary policy operates in Bangladesh.

The document is candid, openly acknowledging weak transmission of monetary policy to inflation, rising inflation expectations, the legacy of high non-performing loans in the banking sector, and the weakness in the real economy.

The Statement explains the Bangladesh Bank’s Monetary Policy Committee’s decision to hold the repo rate at 9.50%, with the Standard Lending Facility rate at 11.00% and the Standard Deposit Facility rate at 7.50%. According to the MPS, the challenge facing the central bank is to support growth without derailing disinflation.

Panam Institute concurs. We further acknowledge that the Bangladesh Bank is operating under very difficult circumstances. For example, the fuel price hike landed just before the statement, and the Bank concedes the hike could reverse recent disinflation.

That is, we agree that the decision to hold interest rates is reasonable, as well as with the MPS’ effective concession that monetary policy alone will not restore growth —that, economic recovery hinges on bank clean-up, fiscal discipline and energy supply, which are outside the MPC’s direct control.

That said, Panam Institute believes that future iterations of the MPS could benefit from further details. Specifically, the MPS will be a more credible document if the following are addressed.

  1. Is the constraint on the supply side of lending (bank health) and business or the price of money? With the repo at 9.5% and inflation at 8.26%, the real policy rate is about 1.2%, which is not historically high, yet credit growth is at historical lows.
  2. Is there a policy tension on the exchange rate? The statement praises taka stability for containing imported inflation, then warns that stability through “excessive intervention” delays adjustment and drains reserves. It ends by calling for the exchange rate to “absorb external shocks” without saying how much flexibility is intended.
  3. Are the banks strong enough to implement the stimulus? The Tk 60,000 crore package and refinance schemes depend on banks with 32.78% NPLs. The central bank itself flags implementation delays and weak balance sheets, so effectiveness is uncertain.
  4. What should be done about the fiscal dominance risk? Broad money growth driven by net credit to government, plus a pay scale and subsidy pressures, hints at monetary policy being pulled toward financing needs. The statement names the risk but offers no safeguards or mitigation measures.
  5. Treasury yields have dropped below policy rate. Does this reduce effectiveness of policy rate as a transmission mechanism?

Further, there are minor quality issues that should be addressed. For example, Chart 2 carries a mislabelled date (“28-Sep-34”), and the IMF inflation forecast mixes a July growth update with an April inflation source. Small errors matter in a first-of-its-kind publication.

Most importantly, however, it is not clear where the MPS sits in the broader monetary policy framework. There is no explicit inflation target or timeline, no quantified projections for inflation or credit, and no concrete bank-resolution roadmap.

Without a monetary policy framework with a target and timeline, the MPC cannot be held accountable against any benchmark, and therefore ultimately the central bank will not gain any credibility.

Panam Institute urges the Bangladesh Bank to lay out a monetary policy framework with a clear policy target. That is the only way to achieve policy credibility and ensure macroeconomic stability.