MEDIA report said Bangladesh Bank (BB) on Tuesday announced the Monetary Policy Stance (MPS) for July-December period of the current fiscal year with a focus on private sector credit growth to achieve higher economic growth at low inflation. After years of sluggish credit growth, the central bank believes a pick-up in credit helps in continuing political stability and restoring business confidence. The new BB Governor termed this policy “cautiously accommodative” and it would accelerate private sector growth, although business people have different views. The growing fear of militancy and deteriorated law and order situation marred with the prevailing culture of impunity and extortions might hinder the projected economic growth.
Under the new policy private sector credit is projected to grow by 16.6 percent by December and 16.5 percent by June of FY17. Credit grew by 16.4 percent as of May, whereas the target up to June was set at 14.8 percent in the last monetary policy. A Deputy Governor of BB claimed that the credit growth is picking up due to the prevailing political stability and business confidence among the businessmen, but business leaders are not satisfied over the direction of credit flow stipulated for the private sector and raise questions about the implication of the loan. Particularly they remained unhappy with still higher rate of lending to business.
The Chief Economist of BB said inflation is expected to be at lower as global market is favourable. But tariff hike of gas and electricity now on card of the government may accelerate inflation. So, the claim that inflation would not go up can’t be right. It is said that the central bank will put more efforts on the supervision, so that the credit does not flow to the risky sectors and credit from foreign sources at low-interest rates will also remain open for businessmen. Experts appreciated the monetary policy saying it is “moderately expansionary” while business people are not so satisfied for infrastructure constraints. Insufficient gas and power for setting up new industry or expanding the old ones remains barriers to use credit.
Despite growing militancy is a major concern the bank did not talk about anything in the new monetary policy about facing of the risk of militant activities. As foreigners are leaving the country fearing insecurity with the increasing militant attacks and lawlessness, the government should restore investors’ confidence, both local and foreign, for private investment growth. Otherwise, announcing monetary policy in every six months would not bring any positive change for the economy. To extract the best benefit from the monetary policy it is highly important to coordinate fiscal, monetary, and exchange policies to achieve the goal.
