Staff Reporter :
Bangladesh Bank (BB) on Thursday announced its half-yearly monetary policy statement (MPS) aiming to boost domestic demand for attaining the government’s target of 7 per cent growth during this fiscal year (FY16).
“Our earlier engine was export. Now domestic demand has been added to it as a new engine for achieving the target,” said Bangladesh Bank governor Dr Atiur Rahman while unveiling the new monetary policy for January-June period (H2) of the current fiscal in a press conference at the central bank headquarters in the city.
The governor said, “That engine is our domestic demand, which, fortunately, can leverage our demographics, tech-savvy youth, market size, and population density.”
“In view of domestic and external developments in recent times, the central bank projected growth for the current financial year at 6.8-6.9 per cent. With continued political stability, growth could reach 7 per cent,” Dr Rahman added, announcing what he called a cautious but supportive monetary stance.
“This policy rebuilds – lower policy rate, prudent credit and broad money targets – can sufficiently accommodate growth without sacrificing the inflation performance,” he said.
The governor noted that the MPS, like previous ones, has been prepared after having discussions with a large number of stakeholders to get the latest pulse of the economy, and incorporated their views on the economic constraints and outlook in designing forward looking monetary policy stance.
He said that the policy direction for the second half of the current financial year would pursue cautious stance, but it would be supportive to investment.
In the MPS, the central bank projected 14.8 per cent credit growth to private sector while broad money would be 15.0 per cent. The projections are slightly lower than the last MPS target, but higher than the actual out come.
Private sector credit growth rose to 13.7 per cent in November, up from 13.2 per cent during the last MPS in June, the policy added.
The governor said BB lowered the policy rates – repo and reverse repo – by 50 basis points to 6.75 and 4.75 respectively to realign policy rates with the market rates balancing the latest output and price considerations as it maintains a cautious but supportive monetary stance.
Referring to the suggestions for setting the lower policy rate and prudent credit and broad money targets, Dr Rahman said the policy would remain vigilant and ready to adjust the BB’s stance as ‘facts on the ground and the outlook on the horizon evolve’.
He said the central bank projected GDP (gross domestic product) growth at 6.8-6.9 per cent and inflation at 6.1 per cent for FY16, ending in June 2016, adding that the growth could be 7.0 per cent if political stability continues.
“Growth performance would clearly have been better had the economy not faced the disruptions from political unrests,” he said.
The central bank suggested providing importance on both export and domestic demand to maintain the macro-economic stability and attain the growth aspirations.
“For these two engines, especially the domestic demand, to function properly financial system has to play a critical role, ensuring that the national savings rise and are then channeled to their most productive and equitable usages, not to the privileged bidders,” he added.
He further said BB attached strong emphasis on improving governance and supervision to achieve higher financial intermediation efficiency, as it is committed to serve the savers and the borrowers.
Like previous ones, he said, the new monetary policy assured that it would continue support to stock markets, with keeping banking sector’s capital market exposures within the global best practice norms linked to their capital bases. “Our prudent monetary policy and regulatory support are designed to foster a sustainable development of the capital markets”, he said.
The governor said BB would provide a $200 million “Green Transformation Fund” to support green transitions in the export-oriented textiles and leather industries, supplemented by another $300 million from the World Bank.
He pointed out that BB put strong emphasis on improving governance and supervision to achieve higher financial intermediation efficiency. In this context, he cited the example of appointing observers to commercial banks by the central bank.
Bangladesh Bank (BB) on Thursday announced its half-yearly monetary policy statement (MPS) aiming to boost domestic demand for attaining the government’s target of 7 per cent growth during this fiscal year (FY16).
“Our earlier engine was export. Now domestic demand has been added to it as a new engine for achieving the target,” said Bangladesh Bank governor Dr Atiur Rahman while unveiling the new monetary policy for January-June period (H2) of the current fiscal in a press conference at the central bank headquarters in the city.
The governor said, “That engine is our domestic demand, which, fortunately, can leverage our demographics, tech-savvy youth, market size, and population density.”
“In view of domestic and external developments in recent times, the central bank projected growth for the current financial year at 6.8-6.9 per cent. With continued political stability, growth could reach 7 per cent,” Dr Rahman added, announcing what he called a cautious but supportive monetary stance.
“This policy rebuilds – lower policy rate, prudent credit and broad money targets – can sufficiently accommodate growth without sacrificing the inflation performance,” he said.
The governor noted that the MPS, like previous ones, has been prepared after having discussions with a large number of stakeholders to get the latest pulse of the economy, and incorporated their views on the economic constraints and outlook in designing forward looking monetary policy stance.
He said that the policy direction for the second half of the current financial year would pursue cautious stance, but it would be supportive to investment.
In the MPS, the central bank projected 14.8 per cent credit growth to private sector while broad money would be 15.0 per cent. The projections are slightly lower than the last MPS target, but higher than the actual out come.
Private sector credit growth rose to 13.7 per cent in November, up from 13.2 per cent during the last MPS in June, the policy added.
The governor said BB lowered the policy rates – repo and reverse repo – by 50 basis points to 6.75 and 4.75 respectively to realign policy rates with the market rates balancing the latest output and price considerations as it maintains a cautious but supportive monetary stance.
Referring to the suggestions for setting the lower policy rate and prudent credit and broad money targets, Dr Rahman said the policy would remain vigilant and ready to adjust the BB’s stance as ‘facts on the ground and the outlook on the horizon evolve’.
He said the central bank projected GDP (gross domestic product) growth at 6.8-6.9 per cent and inflation at 6.1 per cent for FY16, ending in June 2016, adding that the growth could be 7.0 per cent if political stability continues.
“Growth performance would clearly have been better had the economy not faced the disruptions from political unrests,” he said.
The central bank suggested providing importance on both export and domestic demand to maintain the macro-economic stability and attain the growth aspirations.
“For these two engines, especially the domestic demand, to function properly financial system has to play a critical role, ensuring that the national savings rise and are then channeled to their most productive and equitable usages, not to the privileged bidders,” he added.
He further said BB attached strong emphasis on improving governance and supervision to achieve higher financial intermediation efficiency, as it is committed to serve the savers and the borrowers.
Like previous ones, he said, the new monetary policy assured that it would continue support to stock markets, with keeping banking sector’s capital market exposures within the global best practice norms linked to their capital bases. “Our prudent monetary policy and regulatory support are designed to foster a sustainable development of the capital markets”, he said.
The governor said BB would provide a $200 million “Green Transformation Fund” to support green transitions in the export-oriented textiles and leather industries, supplemented by another $300 million from the World Bank.
He pointed out that BB put strong emphasis on improving governance and supervision to achieve higher financial intermediation efficiency. In this context, he cited the example of appointing observers to commercial banks by the central bank.
