Interest cut on loan for import
Will it bring down the prices?
The central bank's circular to commercial banks directing them to reduce interest rates to 12 percent from 14-16 percent on loans for import of 10 essential commodities apparently comes as a move to catch the bull of soaring market prices by the horn. This is an attempted price stabilisation measure prompted by a collapse of the productive sector brought on by devastating floods, unabated increase in international commodity prices and the need for ensuring steady supply of essentials during the month of Ramadan.
To us, this appears to be a rather simplistic recipe, well-intentioned that it must be. The banks' profit margin is set to be reduced, as they are being asked to part with some profit for the sake of consumers and in the interest of market stability. That is well and good. Now the question is, are the importers, wholesalers, middlemen and retailers willing to pass on the benefit of the reduced cost of import to the consumers? The margin of the interest rate cut being fairly large, they should be able to share the benefit with the consumers. If they don't, it will reflect badly on their social commitment. Even so, we stress the need for a market monitoring mechanism to work vigorously to neutralise possible intervention by cartels and middlemen at various tiers.
The second crucial factor that could undercut the positive impact of the interest cut has to do with the international prices. The move presupposes that international prices will not rise from the present level; but who can guarantee this, given the fluctuating international market behaviour? Let's not forget that despite the government's recourse to zero tariff on import of certain essential commodities the prices have not clearly come down. This is because of the fact that international prices have been on the rise except for that of sugar.
The bottomline is seeking cooperation of the chamber bodies to work out a market monitoring mechanism to jointly oversee implementation of various measures taken by the government.
For all latest news, follow The Daily Star's Google News channel.
Comments