Monetary policy not private sector-friendly: DCCI

The Dhaka Chamber of Commerce and Industry (DCCI) on Sunday claimed that the recently announced monetary policy is not private-sector friendly.

“As a whole, the H1 MPS (half-yearly monetary policy statement) does not seem to encourage the substantial private sector borrowing and investment as this sector needs to be revamped against the slimming and declining FDI trend in private sector of Bangladesh,” the chamber body said in a reaction.

Bangladesh Bank announced its half-yearly (H1 FY2015-16) monetary policy on July 30 aiming to curb inflation and increase investment to support 7% growth target and 6.2% inflation target, UNB reports.

“Indeed, the cost of borrowing is still unaffordable to our SME and other industries’ entrepreneurs though central bank forecasts 15% growth in private sector borrowing in this term,” said the DCCI.

Inflation control is subject to other external economic factors but the higher cost of borrowing, cost of doing business and proposed pay scale may interpolate the expected inflation regulation in the market, it observed.

Offshore financing is being attracted and injected to private sector more than that of local banks and financial institutions due to lack of affordability, which signals apparent weakness of our local financial sector.

Imports grew at 12 percent whereas export growth was roughly around 3.3 percent in the recently ended fiscal year.

The frequent imbalance of the exchange rate of Taka and US dollar may inflate the prices of essential commodities and reduce the purchasing power of money. The increase in import expenditure does not equate to the fall in export earnings.

The DCCI said the proposed MPS does not have any clear indication and direction to recover and minimize the burden of classified borrowing and bad debts in the banking sector.

BB declares that productive sectors will get loans at lower rate of interest but this will not reap any benefit until other influential factors in money market and economy consistently stabilize and improve in the next two quarters.

The cost of borrowing and doing business need to be reasonably low to encourage decent flow of lending for increasing industrialization, economic mobility towards achieving 8 percent GDP growth as per the vision 2021, and double digit GDP growth by the year 2030.

The BB forecasts public sector credit growth is likely to be at 23.7 percent this fiscal. The Finance Division has also expressed its worries over excessive government borrowing from banking sector, which has nearly crossed Tk. 28,000 crore as of July 22 this year.

“DCCI feels existence of bad loans is a major concern for the economy. As such DCCI opines that slashing rate of interest on lending may fuel investment, both local and foreign,” it said.

The DCCI also feels that the MPS doesn't reflect the growth potentials and employment creation opportunities in productive sectors.