Staff Reporter :
As widely expected, Bangladesh Bank (BB) on Wednesday kept its key policy rates unchanged and lowered the private sector credit growth target for the remaining period of the financial year, citing near-term domestic and external risks.
BB came up with the strategy in its monetary policy for the second half (H2) of the fiscal year (FY) 2018-19.
“The monetary programmes for H2FY19 aimed at providing adequate supply of quality credit to support the Government’s growth and inflation targets, while promoting domestic and external financial stability amid the shifting of global and internal risk consideration,” according to the monetary policy statement (MPS).
In the new monetary policy, the private sector credit growth target was set at 16.5 per cent from 16.8 per cent in the previous policy, which was framed for the first half (H1) of the FY19.
In the first half (July-December) of the current fiscal year, private sector credit growth stood at 13.3 per cent missing the target by 3.5 percentage point due to demand and supply factors ahead of national election.
Given the near-term domestic and global inflation and growth outlook and the associated risk, repo and reverse repo rates will remain at its current level of 6.0 per cent and 4.75 per cent respectively for the H2 of the current fiscal year.
In the monetary policy, broad money (M2) and domestic credit growth ceiling were fixed at 12.0 per cent and 15.9 per cent respectively.
The monetary programme is sufficient to accommodate real GDP growth up to 7.8 per cent and keep average annual CPI inflation rate within 5.6 per cent, according to the MPS.
The monetary policy has projected a higher credit target for the public sector fixing at 10.9 per cent in line with the recent borrowing trends by the government.
Public sector borrowing target was fixed at 8.5 per cent in the previous policy. But it stood at 13.3 per cent at the end of December last year after a heavy borrowing by the government ahead of the national election.
“The monetary programme and stance for the second half of the fiscal year 2019 has been formulated keeping mind in the current macro-economic situation,” said Governor Dr Fazle Kabir, while unveiling the monetary policy at the central bank’s headquarters in the morning.
He said the monetary targets are sufficient to achieve the GDP growth of 7.8 per cent and to meet the annual inflation target of 5.6 per cent.
“BB’s usual support and promotion of adequate credit flows to job creating productive sectors will continue in the second half of this fiscal for realizing the government’s aspiration to create thousands of new jobs through attaining a higher economic growth,” he added.
BB in its latest monetary policy projects GDP growth in the range of 7.5-8.2 per cent for the FY 19, assuming continued political stability and facing no large external shock.
“Economic activities remained buoyant in H1 of the FY19 aided by strong domestic demand, growth in remittance inflows and a pick-up in exports. Government expenditure also supported the domestic consumption and investment. Buyers’ confidence in the RMG industry underpinned by the improving workplace safety conditions and external demands. Improved energy supply and political calmness also supported economic activities,” according to the MPS.
BB also projects export growth at 14 per cent, remittance growth at around 11 per cent and import growth at 7.5 per cent in FY19.
