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Expansionary monetary policy may continue

Economic recovery to get priority

  • Staff Correspondent
  • 26 July, 2021 12:00 AM
  • Print news

Bangladesh Bank (BB) is planning to continue the expansionary monetary policy in the current fiscal year with additional attention to increasing investment in industries and SME sector to expedite the recovery of economy from the pandemic.

The central bank’s observation has found that the investment did not grow at the desired level in the second half of the last fiscal year despite a flexible interest rate and lower inflation rate, due to the second wave of coronavirus.

The monetary policy followed in FY21 was very effective to grow the domestic economy in the pandemic period whereby the country made record in receiving inward remittance of $24.77 billion and earned $38.75 billion from export with 15.1 percent growth in 2020-21 fiscal year, the observation said.

So, the current monetary policy will be followed in the current fiscal year, said a BB official, who works to prepare the monetary policy.

According to the central bank, the credit flow fell to 7.55 percent year-on-year in May 2021 from 8.29 percent a month ago. The growth was 8.79 percent in March 2021.

It was 7.25 percentage points lower than the central bank’s target of 14.80 percent for the second half (H2) of the just concluded FY.

“The monetary policy will focus on investment attraction and new job creation for both skilled and non-skilled youths with emphasis on creation of new entrepreneurs in the SME sector,” said Md Serajul Islam, spokesperson for the BB.

He said the officials are talking virtually with the stockholders related to monetary policy and trying to finalise the monetary policy within this month.

The BB Board of Directors has already instructed for preparing the monetary policy putting priority to recovery of the economy from the pandemic like the concluded fiscal year, Serajul said.

As part of the expansionary policy stance, the BB slashed overnight repurchase agreement (repo) rate by 50 basis points to 4.75 percent while cutting the reverse repo rate to 4 percent from 4.75 percent. The central bank cuts the policy rates to ensure availability of cheaper funds for banks and greater flow of funds into the economy.

Besides, the bank rate has been re-fixed at 4 percent from 5 percent to rationalise it with the current interest rate regime.