Kazi Zahidul Hasan :
The central bank will tighten regulation on monetary policy to control over high credit growth to private sector that hit over 19 per cent during the first half of the current fiscal year (July-December).
Officials said Bangladesh Bank (BB) will unveil the monetary policy today (Monday) with plans to put brake on ‘booming’ private sector credit.
Governor Dr Fazle Kabir will announce the monetary policy statement followed by a press briefing to be held at 2pm at the BB’s headquarters in the city.
“The nature of the new monetary policy will be ‘cautiously accommodative’ and the central bank will tighten regulation on it to control the high credit growth to private sector,” a senior BB official told The New Nation yesterday, asking not to be named. He said the credit growth surpassed BB’s monetary target set at the previous policy showing the warning signs.
The central bank in its previous monetary policy had set private sector credit growth at 16.2 per cent.
“BB will tighten control on credit to contain inflation and prevent credit flow to unproductive sector,” said the central banker. He said the most important driver of an economy, off course, is credit expansion. But an unnecessary money flow through banking system is no longer a sustainable option for economic growth and inflation control.
“The credit remains ample and continues to fuel inflation causing concern to BB policymakers,” he said, adding, “A persistently high inflation could dampen economic growth, but the major negative side effect remains the social ramifications.”
Inflation was expected to remain below at 5.8 percent up to June this year. But, it reached 5.83 percent in December last year due to rising food and commodity prices.
Inflation could choke up further if the current money supply to market could not be curbed.
“In this context, the central bank moves for tightening regulatory controls to be focused on its new monetary policy to ensure adequate and sustainable credit growth to the productive sector to achieve ensure maximum economic growth and keep inflation at tolerable level,” added the BB official.
The central banker also hinted that the soaring credit growth may be halted through bringing down banks’ advance to deposit ratios.
