Business Desk :
Excess liquidity which turned into a trouble amid low credit demand, should mop up through raising monetary rates and lifting incentives on remittance to keep money market stable and prevent fund diversion.
Country’s think tank Centre for Policy Dialogue (CPD) came up with the observation at an online media briefing titled “CPD’s Reaction on MPS FY2021-22: To what extent monetary policy meets the needs of the economy,” held on Tuesday.
Dr Fahmida Khatun, Executive Director of CPD in her presentation said excess liquidity doubled in last one year bringing down call money rate and lending rate.
Low private sector credit demand is the reason behind piling up liquidity.
In the new monetary policy, the central bank kept the monetary rates relaxed, she said.
But this now time has come to consider about mopping up money from the market, she said.
Bangladesh Bank can increase CRR (Cash Reserve Ratio) requirement to mop up excess liquidity, she suggested. Dr Khondaker Golam Moazzem, Research Director said that Bangladesh Bank should reconsider their expansionary stance in the new monetary policy.
He said that it is difficult to increase credit growth to 14.8% amid this ongoing slow demand. In this situation, credit growth ceiling can be revised down to 12%.
Remittance inflow played vital role in increasing excess liquidity. Bangladesh Bank can now lift 2% incentive from remittance, he said.
He raised question about source of remittance. At the same time he proposed to lift the option of sending remittance up to $5000 without documentation.
Professor Mustafizur Rahman, Distinguished Fellow of CPD opined that banking sector is now in vicious cycle of excess liquidity. In this case, the central bank can create bond to invest remittance money instead of injecting liquidity to the market through purchasing dollar.
He also opined that the private sector credit growth target is unrealistic. When actual credit growth is 8%, it is illogical to set ceiling 14.8%. The Bangladesh Bank set the target only to match with government’s GDP growth target.
