Global Economic Crisis and

the Leadership Challenges:

A Regulatory Perspective
Dr. Atiur Rahman
Former Governor, Bangladesh Bank
Chairperson, Unnayan Shamannay

Keynote presentation at the BFIN Conference on “Nepal Economic Outlook

2023 and Beyond” at Aloft Kathmandu Thamel on 24 July 2022
Increasing integration of the emerging-market
economies into the global economy ensured supply
of low-cost goods and services.

Large-scale migration from Global South to the The Post-Cold

North kept a lid on wages in advanced economies.
War world
witnessed the era
Technological innovations reduced costs of of Great
production for many goods and services.
Moderation
Relative geopolitical stability resulted in allocation of
production to least costly locations and ensured
security of investments.
 Pandemic induced economic
slowdown

But the stability Balkanization (segmentation)of the

started to show its Trends global economy
cracks during the toward
2008 financial Global Supply chain disruptions caused by
crisis and then Stagflation the Ukraine-Russia war

during the
pandemic in 2020 Sweeping sanctions threatening the
global financial system

Climate change (encroachment of

fragile ecosystems)
 From Great Moderation to
Great Stagflation

Ò … as in the 1970s, persistent and

repeated negative supply shocks will
combine with loose monetary, fiscal, and
credit policies to produce stagflation.
Moreover, high debt ratios will create
conditions for stagflationary debt crises.

Nouriel Roubini
Professor Emeritus of Economics, New York University
Project Syndicate, 09 August 2022
 Global Economic
Slowdown is looming ahead
IMF expects the world economy to grow 3.2% in 2022.

It will further slowdown to 2.9% in 2023

US, China, and India will lead downgrades in 2022 (2.3%,

3.3%, and 7.4% respectively).
 Leadership amid the global crisis

Prudent leadership is a must to cope with

this global economic crisis.

And leadership has to aptly manage the

digital transformation to overcome these
challenges.
Leading Digital Transformation
 Digital
capabilities
Leaders should
approach
change
holistically, No
silos
Strategic Adaptive Blending
touch eco- with
points systems automation
Encourage organizational culture and
enhance partnership engagements

Don’t Jump Encourage persistence and perseverance.

Unlearn What you learned traditionally.

Focus on Data, technology architecture and product delivery.

Ò I am the captain of
my soul …
- Nelson Mandela

- Soul to be inspired
- Talent continuum
- Maximum participatory engagement
- Change mindset to lead change
 Managing Digital Transformation

MOTIVATION
CHALLENGES!
Exterior
Innovations
MAJOR DRIVER INTEGRATION between
components through
Technology collaboration
GOAL
NAVIGATION, i.e.,
Institutional mapping change over
Change time

HUMAN FACTORS
It takes more than just technology alone

A DIGITAL Look Outside, not inside

CULTURE
(empowers Prize delegation over control
people, attracts
better talent) Encourage boldness over caution

More action, less planning

Finding the right balance between
alignment and autonomy is the
ultimate test of leadership during a Collaboration over individual effort
digital transformation.
Developing leadership for financial sector:
The Bangladesh Bank Experience
 Our participatory approach to
innovation & management

Started with the mission of changing the mindset of the regulators

to promote financial inclusion and technology-based supervision.

The aim was to make central bank a knowledge institution

which could think globally and act locally.

We wanted to instill a culture of learning amongst regulators who

generally preferred going for “business as usual.”
A balancing act between innovation and
maintenance of continuity
Initial push
Stakeholder Response
We actively
encouraged Positive Change
Yet, each
innovation, open department came
discussion with Regulators started
out with innovative to go beyond
departments. ideas about how to compliance culture.
make it more user-
friendly.
 Initiatives to deepen the ethical anchor

Immersion Extension Partnership

Encouraged new Promoted extension Embarked on

recruits to go for an education and exchange programs
immersion program training both at with other central
to learn more about home and abroad to banks. Dhaka School
rural economy. transform BB a of Bank
Agriculture and knowledge Management, got
SMEs were focused institution. affiliated with the
on immersion University of Dhaka.
program.
 Combined Effort for
Human Capital Development

- Can work with - Can be mid- - Can play the

University
Central Bank
Industry

universities & wife to bridge role of match-

training centers to making between
prepare graduates the gaps
between the the industry and
industry & the new
- Provide information academia graduates.
on opportunities &
skills
- Apprentice
programs, job
fairs etc.
 Imperatives for Nepal:
Guiding the economy amid the global turmoil
 Persistent geopolitical tensions
likely to weigh on growth outlook

WB has projected Nepal economy to grow by 3.7% in 2021-22 and 4.1% in 2022-23
(respectively 0.2 and 0.6 points lesser than previous estimates).

Retail inflation has been accelerating since March 2022. It has hit a six-year high of
8.6% in June (pushed up by the surges in food and fuel costs).

Merchandise trade deficit has soared to an all-time high of Rs 1,577 billion during the
first 11 months of FY 2021-22. This is because of high dependence on petroleum and
edible oil imports as well as because of local currency depreciation.

Source: CARE Ratings Ltd.

 Nepal Rastra
Bank (NRB) has
rightly focused Growth target for Bank rate raised to
credit expansion 8.5% (from 7%).
on controlling reduced to 12.6%
CRR requirement
Repo rate raised to
inflation and raised to 4% (from
(earlier 19%). Same 7% (from 5.5%).
3%). SLR raised to
reining in credit for money supply is Deposit collection rate
12% (from 10%)
also curtailed to 12% raised to 5.5% (from
expansion (earlier 18%) 4%)

Inflation target for the FY has been set at 7% in the annual budget

Source: CARE Ratings Ltd.

 Nepal not likely
to face a
Public debt is Foreign debts Govt. is situation like Sri
only 40% of are mostly arresting
GDP, of which concessional burgeoning Lanka
foreign debt is and with longer trade deficit,
just over 50%. repayment increasing
periods. agricultural
production,
reducing import
of fossil fuels.

Source: Think Aloud, Volume 9, Issue 2 (July 1, 2022), SANEM

 “We don’t see any economic crisis in Nepal based on current economic indicators
of the country, … the import items are dominated by capital goods such as
machinery and intermediary goods, including raw materials which contribute to
economic growth.”

- Alice Joan Brooks, Senior Country Economist, World Bank (Nepal)

22 April 2022

“It is expected that these developments (increasing earnings from tourism and
remittances) will help ease external sector pressure in a few months. Rather
than putting direct curbs on imports, our focus will be on stabilizing the
external sector by managing demand through tightening measures.”

- Maha Prasad Adhikari, Governor, Nepal Rastra Bank

01 August 2022
Looking Ahead
 Shifting towards further resilience and sustainability:
Managing energy demands and transitioning to renewables

(I) Tax the excessive profit by energy companies to fund social protection
programs, (II) All countries must manage energy demands, (III) Accelerating
transition to renewables, and (IV) Finance for green energy transition must be
scaled up.

- UNCTAD recommendations related to the ongoing energy ciris

03 August 2022

“If they (UNCTAD’s recommendations related to energy crisis) are pursued,

such policies must be strictly time-bound and targeted, to ease the burden on
the energy-poor and the most vulnerable, during the fastest possible transition
to renewables.”

- António Guterres, Secretary General, United Nations

03 August 2022
 Directives for the financial sector
amid the current crisis
Focus more on exchange rate stabilizing through depressing demand for unnecessary imports and
incentivize export and remittance.

Continue pruning development projects.

Maintain regulatory support for inclusive finance (e.g., agriculture, CMSME, sustainable finance etc.)
Move towards interest rate flexibility, even if for some sectors.
Enhance monitoring trade finance including transfer pricing.
Encourage partnership between banks, fin-techs and MFIs.
Thank You …