Bangladesh Bank reports non-performing loans (NPLs) at 11%, but the actual figure is 25%, indicating significant discrepancies in financial reporting. Increasing liquidity to Shariah-based banks could exacerbate inflation and devalue the taka, necessitating immediate intervention. A contractionary monetary policy is essential, including raising policy interest rates, halting currency printing, withdrawing remittance incentives, and adopting market-based interest and exchange rates. Strengthening forex reserves is crucial to maintain donor and investor confidence. The banking sector faces persistent issues like bad loans, corruption, and money laundering, which cannot be resolved by concealing data. Comprehensive reforms, similar to India’s in the 1990s, are required. This cleanup must be led by the government and the central bank, with a strong political commitment to eliminate systemic problems and restore stability to the financial sector.
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