BSS, Dhaka :
Bangladesh Bank (BB) is preparing the new monetary policy statement (MPS) with special focus on some measures for increasing credit flow and spurring local and foreign investment.
The new MPS for the first half of the current 2014-15 financial year (FY15) would be announced later this month.
“There will be some measures to cut lending rate to create more demand for credit in the market,” a central bank official told BSS.
Accordingly, he said the interest on bank’s deposit would also be reduced to protect the interest of both the people and banking sector.
The central bank in its two past MPS kept private sector credit growth to 16.5 percent to manage inflation at a comfortable level, which had been soaring due to high food prices. The inflation at the end of June dropped to a 17-month low of 6.97, creating the scoop of credit expansion particularly to the productive sectors.
The central bank, however, would prefer small and medium enterprises and similar sectors for credit expansion so money circulation on the market would not increase from non-productive spending, the BB official said.
Besides, the central bank is expecting that the current trend of export and import would also help increase credit flow to private sector in the coming days.
The official said that the new MPS would have some measures to create scope of offering incentives to encourage both local and foreign investment.
Economists, think-tanks and development partners earlier cautioned that the economy in the next few years would bump into some major challenges. Among the challenges is driving forward the country’s industrial sector by continuously attracting domestic and foreign investment.
Keeping in mind the long term goal of mobilizing investment from internal and external sources, the next MPS would propose incentive measures for investment in the productive sector, but with a balanced approach so the incentives would not hinder the growth of existing industries, the official said.
Apart from these new measures, the official said that the next MPS would stick to the old strategy to complement the fiscal measures, announced in the national budget for FY15.
“Like the previous ones, the new MPS would neither be contractionary nor would it be expansionary as it would keep trying to contain inflation while driving credit flow to private and productive sectors,” he said.
The budget for FY15 targeted 7.3 percent GDP growth while keeping inflation below 6.0 percent.
“The next MPS would have a number of important steps to help achieve the fiscal target,” he said.
The central bank on January 27 announced its current MPS for January-June period with major focus on containing inflation, boosting investment and the GDP growth. The inflation came to a 17-month low in June, but the target of investment and GDP growth was not achieved due to disruption in trade and business by political unrest.
Economists earlier suggested that it would be a tough job for Governor Dr Atiur Rahman to help reshape the economy with the monetary policy support alone as the pre-election shutdown and blockade cost the country over Taka 49,000 crore, which is equivalent to 4.7 percent of the GDP.
Now, the central bank is expecting better outcome from the next MPS provided with the current political stability sustains for a longer period.
