Badrul Ahsan :
The Central Bank has finally decided to announce monetary policy today for the first half of the current fiscal year with an aim at achieving higher economic growth in line with the budgetary target.
The main attraction of the monetary policy is that the Bangladesh Bank (BB) may set the private sector credit growth target between 16.5 percent and 17 percent.
In the immediate past monetary policy, the private sector credit growth target was set 16.5 percent.
As of May, credit growth was 16.03 percent. In contrast, the private sector credit growth stood at 16.78 percent in June last year.
“In recent time, inflation has been on the rise due to food price spiral, as such, the new policy will keep an eye on this,” said a high official of the BB, adding that the private sector credit growth will be shifted much.
There will be no changes in policy rates, however, he added.
The government has set the GDP growth target at 7.4 percent and inflation target at 5.5 percent for 2017-18.
The monetary policy must particularly look to contain inflation, which has an upward trend, due to a rise in food prices, said Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue.
He, however, said, it will be difficult to contain inflation within 5.5 percent this year.
Food inflation almost doubled in the rural areas to 7.2 percent in June this year from 3.44 percent a year earlier.
In the urban areas, food inflation was 8.21 percent last month, up from 6.06 percent a year earlier.
Inflation rose because of the rice price spiral. In 2016-17 coarse rice price stood at Tk 39.18 per kilogram on average. It was Tk 45.62 a kg in June, according to data from the Bangladesh Bureau of Statistics.
In 2015-16, coarse rice price on average was Tk 36.42 per kg.
“The Central Bank’s role is minimal in containing food inflation,” said the BB official.
Even then, the BB has taken a number of steps to make rice import easier. If required more steps will be taken in future, he said.
“Thanks to these steps, rice import is increasing,” he added.Last fiscal, letters of credit for import of 6.91 lakh tonnes of rice were opened. Of the amount, 4.37 lakh tonnes were in the month of June alone.
The Central Bank will remain cautious so that credit to unproductive sector does not increase, in order to contain non-food inflation, the BB official said, adding that banks will be encouraged to give more loans to productive sectors, and small and medium enterprises.
