Bangladesh Bank rolls out new monetary policy, says growth may miss target

The central bank has announced a new monetary policy for the second half of the current fiscal even as it expressed doubts about reaching the growth target set for the first half of the financial year.

Bangladesh Bank (BB) has observed that the current political unrest has cast a shadow of uncertainty over achieving the target.

Governor Atiur Rahman expressed the doubt while announcing the policy for the January-June term of the 2014-15 fiscal on Thursday.

“Import growth has overcome the sluggishness of the past two years. The current trade balance has returned to deficit from surplus as the import of capital machinery and raw materials have increased.

Photo: asaduzzaman pramanik/ bdnews24.com

“The progress in investment and production has brightened the possibilities of crossing the growth projected for the current fiscal. But unfortunately, the reappearance of political unrest has cast a shadow of uncertainty over the possibilities,” Atiur said.

The central bank in its monetary policy for the first half of the fiscal had raised the projected growth from 6.5 percent to 6.8 percent.

In the budget, the projected growth was set at 7.3 percent.

“Controlled inflation, positive reserve and stable trading rate of foreign currencies are very encouraging,” the governor said.

Photo: asaduzzaman pramanik/ bdnews24.com

“It will be possible to achieve the growth aimed by the government if infrastructure and fuel sectors get necessary monitoring,” he added.

He further said, “It is very necessary to overcome the current situation for the sake of preserving the continuity towards achieving growth and reducing poverty, though the resilience of our economy is well-known.

“I hope peace and stability will return to the country and we will be able to achieve the growth projected in the first half of the monetary policy.”

Atiur said the central bank was ready to supply inclusive and environment-friendly funds to the financial sector in supporting the government’s development strategy within a restrained and cautious monetary policy necessary for modest inflation.

“As the rate of average annual inflation is over the targeted 6.5 percent and it continues to be over the target, and in the background of the current political unrest, no new laxity or strictness has been included in the new monetary policy,” he said.

“The past continuity will be maintained,” he added.

The new monetary policy aims at keeping the average annual rate of inflation within 6.5 percent by the end of the current fiscal.

The rate has been 6.99 percent since December.

Photo: asaduzzaman pramanik/ bdnews24.com

Despite the investors’ worry over the political unrest, the BB foresees an increasing flow of loans in the banking sector in the next six months.

The growth of loans in the private sector has been set at 15.5 percent in the new monetary policy. It was 14 percent during the past half.

The central bank, however, has not specified the growth of foreign loans to the private sector.

The governor said the private productive organisations were given the opportunity to use short-term and long-term foreign funds.

According to the BB, the growth of loans in the private sector was 12.7 percent after November.

The new monetary policy said the central bank was trying to intensify the competition between the banks by continuing its effort to decrease interest rate.

Approving a loan restructuring policy, the governor said the system was accepted globally.

Photo: asaduzzaman pramanik/ bdnews24.com

“Bangladesh Bank has not taken the step to give advantage to some specific quarters. It will be implemented equally for all,” he added.

He further said the central bank also made a policy regarding good borrowers.

“The Banking Regulation and Policy Department has already been instructed in this regard. We are making a policy to arrange rebate for those who are doing good, repaying loans regularly,” he said.

BB Deputy Governors Abul Quasem, Shitangshu Kumar Sur Chowdhury and Nazneen Sultana, Change Management Adviser Allah Malik Kazemi and Chief Economist Biru Paksha Paul, among others, were present at the function.