Dhaka, Bangladesh (BBN)-The central bank on Wednesday recommended ensuring adequate power and gas supplies immediately for achieving a sustainable economic growth, stressing at the same time a curb on inflation.
"For the output potential of exports and domestic consumption to be realized, availability of adequate power and gas supplies must be ensured with utmost urgency," said the Bangladesh Bank (BB) in its latest quarterly report.
The economy has continued to be on the steady path of growth in the third quarter of the current fiscal year, well supported by robust domestic demand and gradual recovery of export growth momentum, the BB report added.
"….the slower-than-expected recovery of exports and the disruptions in output activities owing to shortage of power and gas supplies are likely to cause fiscal 2009-10 (FY10) real gross domestic product (GDP) growth to fall somewhat short of the initial projection of around 6 per cent," the report noted.
The central bank said disruptions in normal manufacturing routines caused by shortages of power and gas supplies, if prolonged, may lead to supply shortages and attendant price pressure; new investment activities are also being slowed down by power and gas supply bottlenecks, as evidenced by lower withdrawal of industrial term loans in Q3 than that in Q2.
Disbursement of industrial term loans recorded a fall by nearly 14 per cent in Q3 due mainly to worsening supply of gas and electricity.
The disbursement of industrial term loans dropped to BDT 62.12 billion during the January-March period of FY10 from BDT 72.11 billion the previous quarter, according to the central bank statistics.
As precautionary measures against the various current and likely future pressure on consumer prices, the central bank has put in place intensified surveillance on capital market activities of banks, has prohibited banks from owning account acquisition of the real estate sector without prior BB clearance and from customer lending for land purchase.
It has also raised the cash reserve requirement (CRR) and statutory liquidity ratio (SLR) for scheduled banks by one-half per cent of their demand and time liabilities.
Domestic credit growth in Q3 remained within program limits at 13.6 percent against programmed 14.5 percent and hence does not appear to have caused any significant demand side pressure on consumer prices, the report said.
The 19.5 percent growth of credit to private sector as of the end of Q3 exceeded program level of 16.7 percent, but this was offset by simultaneous major decline in the government's bank borrowing, according to the BB quarterly (BBQ) for the January-March period of 2010.
The central bank has predicted that the 12-month average consumers' price index (CPI) inflation might reach around seven per cent by the end of this fiscal, exceeding the program projection of 6.5 percent.
The rate of annual average inflation went up by 0.31 percentage point in March this year over that of the previous month mainly because of the increase in prices of food items.
The inflation rate moved up to 6.26 per cent in March from 5.95 per cent in February on the annual average basis, the Bangladesh Bureau of Statistics said.
"The upward pressure on domestic consumer prices originates mainly from rising trends in international prices of major food and non-food commodities feeding in through import and export channels in the open external trade regime," the BB report added.
Also, the price pressure in the real estate and stock markets, sustained by liquidity from continually growing workers' remittance inflows impart second round effects on consumer prices, according to the BBQ.
BNN/SS/SI/AD-10June10-10:17 am (BST)