Ashraf Ahmed, CEO of Riverstone Capital Ltd and President of the Dhaka Chamber of Commerce and Industry (DCCI), shares his perspectives on the private sector's current challenges, policy impacts, and strategic directions in an interview with Jago News staff reporter Md Samiur Rahman Sazzad
Jago News: What is your opinion on the current state of the private sector and potential solutions?
Ashraf: The private sector has faced multiple disruptions in recent years. Our main challenges now are in law and order, energy security, and financial stability. Ensuring uninterrupted energy supply and a stable law-and-order environment is critical. Rising working capital needs, inflation, and a tightening monetary policy have made operations tough, risking bankruptcies and increasing bank non-performing loans.
Rising working capital demands, driven by the increased costs of imported materials and inflation, are straining the private sector, while contractionary monetary policies are raising interest costs and limiting banking-sector liquidity. Additionally, new classification rules are expected to take effect soon, which, combined, could reduce productive capacity and lead to more bankruptcies and rising non-performing loans (NPLs) in the banking system.
Addressing these issues requires more than just law enforcement—it demands maintaining order and ensuring that factories stay open and operational. We must secure an uninterrupted energy supply for industries at manageable prices. It's also essential to consider reversing contractionary monetary policies as soon as inflation is under control, as prolonged tightening could end up shrinking the real economy.
Jago News: How do you interpret the improvement in reserve pressures in the past two months?
Ashraf: Our trade deficit has narrowed significantly due to import restrictions and higher exchange rates. If this trend continues, we can expect FX reserves to stabilize, easing the Balance of Payments challenge—a very positive development.
Additionally, falling USD value and interest rates are reducing devaluation pressure, and this trend may be echoed by other central banks. This shift could lower our expenses and increase USD credit flow. A stable exchange rate would also help mitigate inflationary pressures.
Jago News: Bangladesh Bank has raised the policy rate from 9.5% to 10% to control inflation. What impact can this leave?
Ashraf: Interest rates for smaller borrowers are already at unsustainable levels. While a high-interest rate strategy may help control inflation in the short term, it risks harming productive capacity in the long run. We believe fiscal measures should be prioritized for inflation control, as they’re generally more effective. Persistently high interest rates and restricted credit flow to private businesses could increase bad loans, ultimately straining banking sector capital—a scenario we must work to prevent.
Jago News: What steps are needed to improve discipline in banking and non-banking financial institutions?
Ashraf: Bangladesh Bank has initiated board reorganisations and begun forensic audits, followed by recovery drives—important steps towards stabilising the sector, though it will take time for these measures to yield full results.
According to the Bangladesh Bank Governor, only about 10 banks are troubled, while the remaining 50 are in acceptable health. The priority now is to maintain systemic stability, ensuring healthy banks remain unaffected so depositors and responsible borrowers can shift to them without issue.
For undercapitalised or insolvent banks, a structured resolution process is crucial. Bankruptcy should prompt a business resolution, possibly by refinancing or transferring loans to healthier banks, using the resulting liquidity to fulfill depositor claims. Reducing these banks’ scale would concentrate the issue, making targeted recovery and recapitalisation more manageable.
Effective steps for these banks might include loan book reduction, bad loan recovery, and profitability through liability management, all of which would be part of a broader restructuring plan expected from the central bank after completing forensic audits.
Jago News: Investment rates are lagging. How can this be improved?
Ashraf: The economy will thrive only if the business environment is favorable; otherwise, it risks stagnation or contraction. Ensuring the rule of law is paramount for building business confidence. The government's intentions, as reflected in the various directives from the Home Ministry, must be implemented effectively. It’s essential to maintain order across all sectors and ensure that state agencies are adequately resourced to fulfill their responsibilities.
To boost both domestic and foreign investment, the government must provide clear direction and a commitment to fostering a conducive business environment and promoting economic growth. Without a firm economic strategy, making sound investment decisions becomes challenging.
Jago News: What are your thoughts on the stock market's recent decline? What does it indicate?
Ashraf: As interest rates rise, corporate earnings are likely to decline, leading to reduced liquidity flow into the capital markets. This is a natural phenomenon. When corporate earnings fall, the price-earnings ratio in the market is also affected. The market is adjusting to these expectations, and, as is often the case, we may see an overcorrection that could create new investment opportunities. However, we must achieve macroeconomic stability before we can expect renewed interest from foreign investors.
The new Commission is implementing various measures, many of which are expected to enhance market governance. These improvements could have a positive long-term impact.
Jago News: Many of the SME policies from 2019 have not been implemented due to a lack of coordination among the relevant institutions. What can be done to protect small entrepreneurs, particularly women entrepreneurs?
Ashraf: The SME Policy 2019, set for revision in 2024, requires restructuring to enhance its effectiveness. The policy should clearly define and address the distinct needs of various subsegments—for example, rural cottage industries and urban high-tech service startups have very different requirements, but both deserve attention.
We also need to streamline institutional arrangements, as we currently have too many entities with divergent and unclear goals.
Most importantly, any strategy we develop must be adequately funded. It’s essential to ensure that our approach has sufficient resources to be effective.
Jago News: What short-term, medium-term, and long-term measures can the interim government implement to address the existing challenges?
Ashraf: The first priority should be ensuring law and order and stability. The government must demonstrate its commitment to creating a better business environment to instill confidence both domestically and internationally. Additionally, we need to guarantee an uninterrupted supply of energy to industries at sustainable prices. Finally, it’s crucial to reverse contractionary policies as soon as inflation is under control.