BANGLADESH Bank has announced the monetary policy for the first half (H I) of 2015 with the “cautiously restrained” monetary policy stance of the latter half (H II) of 2014, as per reports of a local daily.Private sector credit will have space for 15.5 percent growth, a substantially higher level than that of the 12.7 percent November 2014 level, BB Governor said while unveiling the new monetary policy at a press conference this week end in Dhaka. “There are no new loosening or tightening trends in the new monetary policy. The cautiously restrained policy will continue unchanged from January-June 2015,” the Governor said.The Governor blamed the renewed political unrest for the Customer Price Index (CPI) to have remained above the targeted ceiling. Imports have recovered from growth sluggishness of the past couple of years, The Governor said, BOP current account balance has turned around from surplus to deficit, from a pick up in imports mainly of capital machinery and production inputs. “The welcome trend of recovery in momentum of investment and output activities in H1 FY2015 strengthened optimism of FY15 GDP growth significantly exceeding the earlier projections (6.5 – 6.8 percent) based on time series trend analyses.”Bangladesh Bank should see the recovery of investment and output level as a blessing from heaven and not due to any discretionary political or economic policy of the government. As such following a cautiously restrained policy does not make any sense as a full blown expansionary policy of recovery should be followed to further stimulate investment, output, and employment. The temporary pick up of investment and output level may not remain so for the long term – in fact, the optimism of businesses may very quickly turn into pessimism considering the current political climate.The government has not significantly improved the required infrastructure – especially in the strategic thrust sectors of energy and communication. It has not managed to set an amenable ground which has room for discussion or dialogue to bring about a positive change in the current political atmosphere. It has failed to ensure that our main manufacturing sector – the readymade garment sector, has the required facilities needed to export its goods smoothly. Instead of going full ahead with a fully expansionary policy it has opted for caution. Unfortunately, what our manufacturers need right now are easy to get bank loans and easier repayment rates. Our agriculture sector also is in dire need of soft loans. A private sector growth rate of 15.5 percent will not be enough to lower interest rates sufficiently to ensure that the crowding out which may occur through government borrowing will not be offset -despite the policy of allowing big companies to get foreign loans and also a bonus of rescheduling their already defaulted loans.Besides, the Central Bank has in a way remained silent on its supervisory over-sights on credit disbursement of the schedule banks for which too many a scam occurred shaking the very foundation of the banking operation system.
