Dhaka, Bangladesh (BBN)-The central bank of Bangladesh will maintain easy credit conditions this fiscal, as it moves to boost investment to mitigate impact of global recession on the economy, the governor said Sunday.

“It’s an accommodative as well as pro-active monetary policy that is designed to support attainment of the highest sustainable output growth without triggering escalation of inflation,” Bangladesh Bank (BB), the country’s central bank, Governor Atiur Rahman told reporters in the capital, Dhaka while announcing the half-yearly monetary policy statement for the July-December period in 2009.

The central bank chief said the economy would still grow at a pace of six percent in the current fiscal year, with inflation reined in at 6.5 percent.

“If the global downturn deepens and prolongs, export growth may not be sustained and large scale return of migrant workers losing jobs in recession ridden host countries may add to difficulties in the domestic scene,” the central bank said.

In the wake of these challenges, the central bank’s latest monetary policy is aimed at “facilitating economic growth through more investments in the real sectors like agricultural and small and medium enterprises (SMEs), the BB governor added.

“We give a signal to the investors that there will no problem in investment in the near future,” the governor said, adding that if needed the central bank would use its foreign exchange reserve to boost output.

“If necessary, we won’t hesitate to use the reserve for any good investments,” Mr. Atiur said, clarifying that the option would be considered only in extremely rare cases.

 The BB explained: “Assuming that the current positive pace of global recovery will continue, Bangladesh will be better off with utilization of the foreign exchange inflows in growth supportive investments than with accretion of ever higher reserves.”

Under the new monetary program, the growth of broad money (M2) would come down to 15.50 per cent in fiscal 2009-2010 (FY10) from an estimated 17.20 per cent in the previous fiscal.

The BB said credit to the private sector will grow at a 16.70 percent from an estimated 15.00 per cent. The growth of reserve money is expected to fall to 3.50 percent by the end of this fiscal from 31.00 per cent in 2008-09 (FY09).

Deputy Governor of the BB Ziaul Hassan Siddiqui said the private sector credit growth projected in the policy is enough to support output growth at six-percent while keep the inflation under control.  “The private sector credit growth target is absolutely reasonable considering the targets of gross domestic product (GDP) and inflation,” Mr. Siddiqui added.

“BB is keeping close watch on market behavior of banks and shall appropriately redress the downward stickiness of lending interest rates by instilling competitive loan pricing practices in the market,” it added.

The central bank is trying to reduce the lending rate, Senior Deputy Governor of the BB Nazrul Huda said, adding that the commercial banks are taking interest in SME lending as the 33 percent of the total loans and advances now go to SMEs from 20 percent three months back.

BBN/SS/SI/AD-20July09-2:14 am (BST)