The central bank Bangladesh Bank on Wednesday rolled out the Monetary Policy Statement (MPS) for the fiscal 2019-20 with an aim to spur economic growth and curb inflation as well. Overall the policy is designed to promote government’s sustainable development agenda by supporting policies and programmes in pursuit of faster economic growth and poverty reduction, which is welcome.
Considering the current global and domestic economic outlook, the BB has retained domestic credit growth ceiling unchanged to 15.9 per cent. BB governor says the credit growth ceiling is adequate to accommodate the targeted 8.2 per cent GDP growth with up to 5.5 per cent annual average inflation.The new policy, however, aims at accelerating money supply by accommodating 14.80 per cent credit growth in the private sector and 24.30 per cent in the public sector, although in the previous fiscal the private sector achieved credit growth of 11.6 per cent. It is hoped that for the sake of accelerating credit growth, bank interest rates will be brought down, for the businesses to benefit from.
We think if policymakers can ensure a stop in the abuse of bank loans, targeted GDP growth can be achieved with this credit ceiling. In this regard the MPS rightly suggested several steps to curb imprudent and unproductive lending, including intensive surveillance on adherence to prescribed asset-liability management and rationalisation of banks’ advance or deposit ratios. Alongside price and macro-financial stability, BB said its financial and monetary policies embrace inclusiveness and environmental dimensions in pursuit of employment creation focused inclusive growth support in tune with government’s SDG agenda.
However, we would like to remind that bank loan is still costly. Although the government instructed banks to lower interest rate to a single digit, it remains a mirage. Double digit bank loan interest is already a major burden for doing business in the country. Overall the MPS looks positive, but policymakers would do well to lower bank loan interest rates to single digit.