Bangladesh Bank Headquarters

Dhaka, Bangladesh (BBN) – The central bank of Bangladesh is set to unveil its second half-yearly (H2) monetary policy on Wednesday, focusing job creation through boosting credit flow to the productive sectors.

Bangladesh Bank (BB) Governor Fazle Kabir will announce the monetary policy statement (MPS) at 11:30 am on the day for the January-June period of the fiscal year (FY), 2018-19, for achieving sustainable economic growth and curbing inflation.
A special meeting of the BB’s board of directors is scheduled to be held at its headquarters on Sunday with the BB governor in the chair to discuss about the proposed MPS, according to officials.

The central bank’s Monetary Policy Committee (MPC) is expected to finalise the overall monetary programmes along with other core policies of the next MPS in line with the board meeting’s discussion, they added.

Talking to the BBN, a BB senior official said the central bank is formulating the next MPS aiming to create employment opportunities through boosting investment in the real economic sectors.

As part of the strategies, the central bank may focus on boosting micro, small and medium enterprises (MSMEs) and agriculture loans along with micro-credit to help create employment opportunities across the country, he added.

“Actually, we want to keep price stable and create employment opportunities through boosting investment in the real sectors like agriculture and MSME,” the central banker explained.

He also said the central bank is giving emphasize on curbing inflation and helping the productive sectors for achieving maximum economic growth by the end of the ongoing FY 19.

The BB officials, however, hinted that policy rates, including CRR (cash reserve requirement), Repo and Reverse Repo, may remain unchanged for H2 of FY 19.

The private sector credit growth target is likely to be re-fixed, considering the overall economic situation along with fund requirement of the government to finance budget deficit, they added.

The credit growth to the private sector came down to 13.20 per cent in December 2018 on a year-on-year basis from 14.01 per cent a month ago, the BB data showed.

This growth was 3.60 percentage points lower than the BB’s target of 16.8 per cent for the first half (H1) of FY 19.

The central bank also projected that the private sector credit would grow at 16.80 per cent in June 2019, according to the MPS for July-December period of FY 19.

In the next MPS, the central bank may maintain its cautious position on containing inflationary pressure on the economy following upward trend of core inflation in the recent months.

The core inflation rose to 4.65 per cent on annual average basis in December 2018 from 4.52 per cent a month ago, according to the central bank’s latest report.

The core inflation was 3.94 per cent in July 2018.

The MPS may also emphasise ensuring the quality of credit through strengthening the central bank’s monitoring and supervision.

They also said the latest situation of capital market along with both foreign exchange and money markets will be considered in the next MPS.

The next MPS is likely to focus on bringing down the volume of classified loans in the banking sector through ensuring credit discipline in the sector, they hinted.

The volume of non-performing loans (NPLs) jumped by nearly 34 per cent to BDT 993.70 billion as on September 30, from BDT 743.03 billion as on December 31, 2017.

The share of classified loans also rose to 11.45 per cent of the total outstanding loans during the period under review from 9.31 per cent nine months ago.

The default loans include substandard, doubtful and bad/loss of total outstanding credits, which stood at BDT 8,680.07 billion as on September 30, 2018, from BDT 7,981.96 billion as on December 31, 2017.

BBN/SSR/AD