Monetary policy sets 17pc pvt credit growth target

Bangladesh Bank emphasises market rate-linked pricing mechanism for national savings certificates (NSCs) for improving financial efficiency, according to its monetary policy statement (MPS) announced on Tuesday.

The central bank also underlined the need for reduction in non-performing loans and increasing the corporate sector’s reliance on capital market financing.

Bangladesh Bank (BB) announced the monetary policy statement (MPS) for the first half of financial year 2018-19 maintaining its growth oriented stance which was also projected in the just outgoing fiscal, reports BSS.

“Like previous ones, this MPS is growth oriented and it maintains restrained stance for keeping the inflation rate at a comfortable level,” said BB governor Fazle Kabir while announcing the monetary policy for July to December 2018 at a press conference held at the central bank headquarters in the city.

He said the MPS sets growth ceilings of the private sector credit growth at 16.8 per cent, domestic credit growth at 15.9 per cent and broad money at 12 per cent respectively while the public sector credit growth is 10.4 per cent, adequate to support growth while maintaining price stability.

He noted that the MPS, like previous ones, has been prepared after having discussions with a large number of stakeholders to get the latest pulse of the economy, and incorporating their views on the economic constraints and outlook in designing a forward looking monetary policy stance.

“For the first time, we took suggestions from the board of directors of the Bangladesh Bank,” he added.

Fazle Kabir said BB has decided to maintain the policy rates at their current levels with repo and reverse repo rates at 6 and 4.75 per cent respectively for balancing the inflation and output risks to improve liquidity conditions and moderate food inflation.

He said BB will continue to resort to incentive and intrusive supervision in ensuring that credit flows reach the priority sectors, including agriculture, manufacturing and small and medium enterprises (SMEs), that can create more better jobs while protecting environment.

To ensure quality of credit, Fazle Kabir said BB has strengthened its supervision and monitoring activities to ensure the credit for productive and employment generating areas.

The central bank chief informed that BB’s policy measures since the last MPS - a reduction in CRR by one percent and repo rate by 75 basis points - along with the increased deposits by public agencies in private bank help moderate the liquidity tightening from the negative Net Foreign Assets (NFA) growth.

“These measures aided banks’ initiatives to moderate interest rate spikes in the near term,” he added.

He said medium-term interest rate and foreign exchange flexibilities remain important pre-conditions for market development and higher investment and employment-focused growth for achieving the Sustainable Development Goals (SDGs) by 2030.

In the outgoing fiscal 2017-18, Fazle Kabir said, GDP growth momentum was underpinned by strong domestic and external demand as reflected in buoyant public and private investment and consumption, driven by higher exports, remittances and private credit growth.

He said there is enough liquidity in the market, so there is a favourable environment in the capital market.

He expected that the recent strategic investment by the Chinese Consortium-Shenzhen Stock Exchange and Shanghai Stock Exchange - will improve capacity and accelerate the development of the capital market.

Deputy governors, executive directors and high officials of the central bank were present at the MPS unveiling ceremony.