Dhaka, Bangladesh (BBN)- The central bank unveiled an accommodative monetary policy on Thursday aiming to achieve maximum economic growth with boosting investment using selective easing strategy.
Bangladesh Bank (BB) Governor Dr Atiur Rahman announced the monetary policy statement (MPS) for the July-December period of this fiscal year (FY) 2015-16 to facilitate real sectors for achieving sustainable economic growth with inflation held in healthy check.
The central bank chief believed that the MPS will support and advance the momentum of inclusive, equitable and environmentally sustainable growth, further consolidating inflation moderation and macroeconomic stability.
The BB governor also announced to launch two funds amounting to US$500 million within this FY 16 for financing of manufacturing enterprises, and for greening initiatives in the export oriented textiles, apparels, and leather sectors.
The MPS is designed to contain credit growth within limits consistent with real sector output growth, according to the governor.
“We’ll have no hesitation in considering easing of the repo, reverse repo policy interest rates to appropriate extent immediately as headline point-to-point and core CPI (consumers’ price index) consumer inflation assume clear downward edging turn,” BB Governor Dr. Rahman said while unveiling the MPS at the central bank headquarters in Dhaka.
The central bank is now working to bring down the inflation to 6.2 per cent by the end of this fiscal from the existing level of 6.40 per cent in line with the government’s budgetary projection.
The inflation, as measured by the CPI, came down to 6.40 per cent in June 2015 on the basis of 12-month average from 6.46 per cent in the month of May last.
On the other hand, the inflation moved up to 6.25 per cent from 6.19 per cent on point-to-point basis, according to Bangladesh Bureau of Statistics (BBS) data.
However, core inflation boiled up to 6.74 per cent in June last from 6.37 per cent a month ago, as the key economic barometer gathered heat. It was 6.28 per cent in April 2015.
The BB is measuring the core inflation, which excludes non-food and non-fuel components, from the CPI.
Reserve money is projected to grow at 16 per cent and broad money (M2) at 15.6 per cent which are adequate to support the growth and inflation targets.
It has also taken the growth rates of both public and private credit into account, the MPS said.
The central bank revised the private-sector credit-growth target for the FY 16 in consideration of the country’s overall situation.
Private sector credit growth is projected to grow by 15.0 per cent by the end of FY 16, against 13.6 per cent of FY 15. But it was targeted at 15.50 per cent for last fiscal.
The projected 23.7 per cent FY 16 public sector credit growth looks high mainly because of negative growth in FY 15, the BB governor explained.
He also said the MPS underscores the need for BB’s heightened supervisory attention on the financial sectors efficiency in inclusive channeling of financing flows to productive undertakings, in terms of credit discipline, risk management, corporate governance and accountability.
“The MPS also clearly underscores BB’s statutory mandate and responsibility of supporting inclusive, environmentally sustainable growth in its developmental central banking role,” Dr. Rahman noted.
Talking to BBN, a BB senior official said the central bank has adopted selective easing through judicious variations of interest rates.
“If taken together, the productive sectors are accessing low cost financing and hence contributing substantially to the supply side capacity of the economy,” he explained.
BBN/SSR/AD