Economists, bankers and business want an expansionary monetary policy for the second half of the current fiscal.
say the targets in the first half of 2013-14 could not be achieved due to
And those for the second half would also falter if
the monetary policy was not an expansionary one.
An expansionary monetary
policy seeks to increase the money supply mostly, to encourage economic growth
or combat inflation.
Bangladesh Bank will announce the monetary policy
for the last 6 months of the 2013-14 fiscal on Jan 29.
"It has not been
possible to discuss with all the stakeholders this time due to the unrest. We
have exchanged e-mails with those who were consulted last time," the central
bank's Chief Economist Hasan Zaman told bdnews24.com. But Zaman gave no idea
about the monetary policy to be adopted for the second half of the
Analysts and observers say that a monetary policy aimed to boost
investment and employment is needed now.
Former central bank Governor
Salehuddin Ahmed said: "Bangladesh Bank's monetary policy has been conventional,
at best one that strikes a contractionary note.
"Those policies focused
only on inflation, but they have to come out of it now and take an expansionary
Ahmed said that such policy should be adopted in order to
boost investments and increase production as well as employment.
The apex trade body FBCCI's president Kazi Akram Uddin
Ahmed told bdnews24.com: "The monetary policy should help groups run their
business well, keep the overall economy vibrant and create
Economist Zaid Bakht advocated cutting the interest rate for
a congenial investment scenario.
"Many will not be able to repay their
loans in the current political situation. The monetary policy should also
address this issue. It can increase the credit flow to the private sector and
also take initiatives to remove the distrust among banks," said Bakht, who is a
Research Director of the Bangladesh Institute of Development
Economist Mostafizur Rahman said that the monetary policy's
prime goal should be to prop up investments and contain
"Because, already inflation is going up and investments are
coming down", he added.
Rahman, who heads private think-tank Centre for
Policy Dialogue (CPD), said that the monetary policy should also look at
"The monetary policy should be cautious about the
government's borrowings. Because, the government is providing with stimulus
packages for political reasons, which will cause the bank borrowings to go up
sharply. That will push up inflation and credit flow to the private sector will
suffer. Though, the liquidity in market is more than enough now."
Bangladesh Bank's monetary policies have been focusing on containing inflation
as well as facilitate rise in investment for economic growth. The last
declared monetary policy clearly failed to achieve that objective. Inflation
went up and investment dropped.
According to Bangladesh Bureau of
Statistics, the average inflation in 2013 rose to 7.53 percent from the previous
year's 6.22 percent. The current fiscal's budget aimed to contain inflation at
Food inflation rose to 9 percent in December from 8.55
percent in November on a point-to-point basis.
The central bank, however,
claims political instability rather than its monetary policy for the rise in
"Though the central bank has nothing to do with food inflation,
but sometimes the money supply system affects it. The recent rise in food price
inflation was due to the current political situation and the neighbouring
country's inflation affected the domestic market," said Bangladesh Bank's Chief
Economist Hasan Zaman.
Stakeholders opted for alternative measures other
than squeezing private sector credit flow to keep inflation under
According to Bangladesh Bank's statistics, private sector credit
flow grew by 9 percent until November of the current fiscal. But, the monetary
policy for Jul- Dec period projected it at 15 percent.