Inflation
A couple of days ago a policy suggestion made by IMF caught my attention and forced me to write something. They suggested that the central bank go for a contractionary monetary policy (less expansionary according to them) to stabilize the price level. I, with many of the general people, failed to understand how an organisation like IMF could suggest such a preposterous policy. The uncontrollable inflation in Bangladesh is not caused by excessive money supply. Had that been the case, then the banks would not have raised their interest rate on deposit to solve their acute liquidity crisis and the business people would not have claimed that they are facing shortage of credit supply. That clearly suggests that there is not enough money in the money market that could create inflation. From our experience, we have been watching that inflation in our country stems from the ever-rising fuel price, shortage of supply, artificial supply crisis created by our suppliers, increased labour and import costs and above all the huge population that is creating tremendous pressure on the limited supplies of economic goods and services. Rather than solving these problems, if we go for reducing money supply, it is certainly not going to do any better. Instead, such a contractionary policy would be detrimental for our economy by slowing down the economic growth through reduced investment and consumption expenditure.
Different international organisations are using the underdeveloped and developing countries as guinea pigs to experiment with their formula of development panacea.
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