Kazi Zahidul Hasan :
Bangladesh Bank (BB) on Tuesday announced its monetary policy for the first half of the current fiscal. The announcement sparked criticism from various quarters.
Economists are of the view that this monetary policy is moderately expansionary from its previous ones but growth supportive.
“The monetary policy setting remains appropriate given the country’s current macroeconomic situation and it is growth supportive,” former BB Governor Dr Mohammed Farashuddin told The New Nation on Wednesday.
He said BB took cautionary stance in formulating monetary policy for the last couple of years. But this time it has come out from such stance apparently setting the policy ‘quite expansionary’ with other qualitative aspects such as selective easing and financial inclusion.
“The basic objective of the monetary policy seems to be promoting investment which is essential to maximize economic growth and employment generation,” he observed.
Dr Farashuddin, a leading economist of the country, also said that BB in its monetary programme set a higher private sector credit growth that means it wants to supply enough liquidity to the banking system to encourage investment.
“The monetary policy alone is not sufficient to accelerate investment and build business confidence, said Dr Farashuddin, adding, “A smooth law and order situation and improved infrastructure are also necessary to improve investment climate”.
He further said that the government is working sincerely to improve the country’s investment climate, with undertaking mega development projects.
“Once these projects would be implemented, it will rapidly stimulate private sector investment taking the economy into a new growth phase,” he said.
When asked, he said, the country’s investment scenario is recovering fast in the wake of boosting credit to the private sector.
Credit to the private sector was programmed in January last at 14.8 per cent but it rose to 16.4 as of last May following rise in imports and consumer loans.
However, the monetary policy expects credit to the private sector to go up to 16.5 per cent until June 2017 from the existing rate of 16.4 per cent.
“The new policy is almost same to that of the previous one and the success of the policy would largely depend on prudent monetary and fiscal management by the authorities concerned,” former BB Governor Dr Salehuddin Ahmed told The New Nation.
Commenting on the private sector credit programme, he said, BB should have set expansionary credit target to the private sector when banks were maintaining surplus liquidity.
“Private sector credit programme has been set at 16.5 per cent in the new monetary policy. There was the room for further widening the credit programme setting it at 17 per cent. Surge in private credits to the tune of 17 per cent is necessary to promote investment and economic growth,” he observed.
The former BB governor also stressed the need for taking cautious stance in ensuring quality credits through strengthening supervision and monitoring by the central bank.
“Whatever be the volume of private credit, it should be invested in productive sectors and inside the country, not siphoned off through fraudulent practices,” he added.
