Bangladesh Bank Headquarters

Dhaka, Bangladesh (BBN) – The central bank has said moderation of inflationary pressures needs to be closely monitored to ensure inflation expectations remain well-anchored.

Besides, a sizeable current account deficit along with changing global and domestic liquidity conditions has made the management of macro-financial stability challenging.

Identifying the challenge, the Bangladesh Bank (BB), the country’s central bank, has stressed “continued careful calibration” for ensuring the country’s macro-financial stability.

“Managing macro-financial stability in the face of a sizeable current account deficit, changing global and domestic liquidity conditions would require continued careful calibration,” the central bank said in its latest Bangladesh Bank Quarterly (BBQ) for January-March 2018, released on Monday.

The existing policy should be implemented properly to ensure the macro-financial stability, a BB senior official explained.

The central bank said despite a large deficit, current account balance witnessed some improvements in the third quarter (Q3) of the fiscal year (FY) 2017-18, aided by a decline in trade deficit and strong remittance inflows.

However, the overall balance remained negative and widened during the Q3) of the just-concluded FY 18.

Bangladesh’s overall balance of payments (BoP) slid to a deficit of $ 1.04 billion during the July-April period of the fiscal, which was a surplus of $ 2.30 billion in the same period of FY 17.

On the other hand, the country’s current-account deficit reached $ 8.51 billion in the first ten months of FY 18 against $ 1.80 billion in the same period of the FY 17, the BB latest data showed.

The higher trade deficit pushed up the current-account deficit during the period under review despite an uptrend in inward remittances.

It also said the lending, deposit, and call money rates showed some upward pressures due to shifting excess liquidity conditions as strong credit growth continued to outpace deposit growth.

The BB quarterly predicted that output growth is expected to receive continued support from strong domestic demand.

It also said a surge in remittance inflows along with strong private sector credit growth boosted consumption demand in the Q3 of the FY 18.

At the same time, higher growth in investment-related imports reflected robust investment demand in the economy.

The agriculture activities also remained solid, supported by benign weather conditions, higher crop price, and timely supply of inputs and finance.