Dhaka, Bangladesh (BBN) – The private sector credit growth has fallen further to 14.62 percent in June this year, which was below the central bank’s target, officials told AHN Media on Wednesday.
The primary reason for the decline has been attributed to the cautious attitude of businessmen in making new investments against the backdrop of global economic recession.
Besides, erratic supply of gas, power and water has also forced the credit flow to decline during the period, officials and bankers said.
They also expected that the private sector credit flow would pick up from the second quarter of this financial year if the government is able to solve gas and electricity problems.
The Bangladesh Bank (BB), the country’s central bank, had estimated the private sector credit growth at 15 percent by the end of June 2009, according to the monetary policy announced by the central bank on July 19 this year.
The private sector credit growth came down to 14.62 percent in June from 16.23 percent in May this year, according to the central bank statistics.
The credit flow to the private sector has been on the decline since October 2008 because of a ‘go-slow’ policy adopted by the businessmen to avoid any financial risk in the face of global economic recession, the BB officials said.
The growth came down to 24.72 per cent in October 2008 from 26.55 per cent in September 2008.
The credit flow to the private sector recorded a growth of 14.62 percent to BDT 277.91 billion in June 2009 on a year-on-year basis from that of 24.94 percent or BDT 379.59 billion of the previous year, the BB’s data showed.
“Project financing has decreased in the recent months because of shortage of gas and electricity supplies particularly to the industrial units, indicating lower credit flow to the private sector,” Managing Director and Chief Executive Officer of the Agrani Bank Limited Syed Abu Naser Bukhtear Ahmed told BBN.
Mr. Bukhtear also said the credit flow to the private sector would start rising from second quarter of this fiscal if the government ensures gas and electricity supplies to the factories.
“Trade financing also slowed down during the period under review as prices of the major commodities including fuel oil in the global markets were on the decline,” a BB senior official noted.
Both the BB official and the commercial bank chief executive see that the private sector credit would pick up after introduction of the framework for public private partnership (PPP).
“Private investment in different infrastructure projects will increase through PPP initiatives,” the BB official said, adding that authorities concerned should formulate framework for the PPP immediately.
BBN/SS/SI/AD-20August09-1:02 am (BST)