Monetary policy to proceed on same track

The monetary policy for the second half of the 2016-2017 fiscal year will proceed similar to the first, as the government tries to increase investment in the country and stimulate economic growth.

Bangladesh Bank Governor Fazle Kabir announced the monetary policy plans for the second half of the year at a press conference on Sunday. “The first half of the year has been productive. We have kept our policies unchanged.”

At the start of the fiscal year, the government set its growth targets at 7.2 percent. It will also attempt to limit inflation to 5.8 percent, according to Finance Minister AMA Muhith. 

It appears Bangladesh is currently on track to hit its growth target, Governor Kabir told the media briefing at the central bank offices.

Domestic credit growth targets during the July to December period were set at 16.4 percent. The private sector credit growth target was set at 16.5 percent, while a target of 15.9 percent was set for public sector.

Bangladesh Bank has set the same targets for the January to June period.

The bank had targeted 16.4 percent, said the governor, but domestic credit growth had come in at 12.3 percent, 4.1 percent lower than the target. 

The private sector credit growth was 15 percent, 1.5 percent lower than the target.

“As the government borrowing from banks to finance budget deficit has come down, it has paved the way for growth in private sector credit flow," said the Bangladesh Bank chief.
 
"However, the government's dependency on saving schemes has adversely affected the bond market," added Kabir.

At the end of December 2016, Bangladesh’s exports grew by 4.4 percent, but remittance payments had fallen by 17.6 percent.

The monetary policy also set a cautious tone on the possibility of a boom in the capital market. “Regulators must be vigilant to ensure the health of the capital market and its recovery from the bearish trends since 2010. Without that vigilance there is serious risk to investors.”

The Bangladesh Bank makes two monetary policy announcements each year in order to guide the implementation of the government’s budget and economic policy. 

The monetary policy for the July to December period was announced on Jul 26 last year.

The central bank meets with several economists, businessmen, bankers and other civil society representatives before announcing its monetary policy.