Bangladesh Bank (BB) on Tuesday unveiled its first-half yearly (July-December) monetary policy for the fiscal 2016-2017 with a target to keep the inflation stable at a ‘tolerant level, UNB reports. While announcing the policy at Jahangir Hall of the Bangladesh Bank Bhaban in the city, its governor Fazle Kabir termed it ‘cautiously accommodative’ to the 7.2 GDP growth target.
In the monetary policy, the target of inflation was set at 5.6 percent against the current rate of inflation at 5.92 percent in June. The original annual target was 6.2 percent. The overall internal credit growth is estimated to be 16.4 percent where private sector credit growth is estimated at 16.5 percent and public sector at 16.6 percent.
“This credit target is deemed to be enough to achieve the target of 7.2 percent GDP growth,” said Fazle Kabir. “The government’s borrowing from banking sector is expected to remain within the target”, the new policy revealed. In the last monetary policy, the private sector credit growth target was 14.8 percent. But it reached 16.4 percent crossing the target.
The central bank announced to continue it policy for inclusive, restrained, accommodative and environment-friendly financial policy in the newly announced monetary policy. Despite the factor that the inflow of remittance by expatriate Bangladeshis has declined by 2.5 percent, the country has met the import bills and other debt servicing requirement.
The governor mentioned that the central bank had to buy foreign currency from the open market to keep stability in the currency market for which the foreign currency reserve crossed the benchmark level of $30 billion. Fazle Kabir also expressed his disappointment to the increased default bank loans.
Though the interests on deposit and loan were downward, due to lack of expected improvement in default loan has resulted in slowing down the trend of lowering interest rate, he said Pointing to persistent demand of the businesses to lower interest rates at banks, the BB governor said, “It will be only possible when there will be a discipline in banking sector through reducing the management risk and default loans.”
The new monetary policy made a clear stance on continuation of the previous strategy for strong monitoring to ensure adequate credit flow for agriculture sector while loan for SME sector at a lower interest has been prioritised.
In the policy, the central bank also assured that its support for green projects will continue while the re-financing schemes will continue for different projects. Responding to question, the central bank governor observed that the terrorist attack at Gulshan will have no impact on the banking sector.
“But the central bank has been giving necessary instructions from time to time to the banks to take necessary measures to maintain security in the banking sector,” he added. BB deputy governors SK Sur Chowdhury and Abu Hena Razee Hasan, chief economist Biru Paksha Paul and other top officials were present at the press conference.