Dhaka, Bangladesh (BBN) – The central bank of Bangladesh should strengthen its monitoring and supervision to ensure credit flow to the productive sectors for achieving maximum economic growth and help control inflation, former Bangladesh Bank (BB) Governor Salehuddin Ahmed has said.

“The central bank will have to check credit diversification from real sectors to other sectors through strengthening monitoring and supervision,” Mr. Ahmed was quoted by the Financial Express (FE), a local newspaper, as saying on Monday while expressing his reactions to the new monetary policy, announced by BB on Sunday.

He also said the central bank should stick to its financial rules and regulations to avoid any risk and ensure discipline in the financial sector.

Terming the new policy a pragmatic one, the former BB boss said the central bank should give emphasis on implantation of the monetary policy properly.

“Achieving the targeted 6.7 per cent economic growth by the end of this fiscal will be challenging if the real sectors do not grow properly,” he said, adding that investment in productive sectors including agriculture, small and medium enterprises (SME) and light engineering and other emerging sectors should be increased to attain the desired economic growth.

On Sunday, the BB unveiled its half-yearly monetary policy that aims at keeping inflation rate at around 7.0 percent by the end of this fiscal through discouraging credit flow into unproductive sectors.

It also focused on achieving an inclusive economic growth by facilitating productive sectors while keeping inflationary pressure under control.

“Barring unforeseen new difficulties, the economy looks well poised to attain the 6.7 percent real gross domestic product (GDP) growth targeted for FY11, as also to leap forward to growth performance well beyond 7 per cent in FY12,” the central bank said in its monetary policy.

The former central bank chief sees that the country’s inflation as measured by consumers’ price index (CPI) would cross 7.0 percent by the end of fiscal year 2010-11 (FY11) on annual average basis.

The BB has estimated that the CPI may hit around 7.0 per cent by the end of this fiscal against the 6.5 per cent level targeted in the government’s FY11 budget.

“Rising trend in prices of essential items including petroleum products on the global market may push inflationary pressures on the economy,” the BB former governor noted.

The country’s inflation as measured by the CPI moved upward slightly in the month of November last mainly because of increase in prices of food items.

The inflation rate moved up to 8.14 percent in November from 8.12 percent in the previous month on the annual average basis, according to the Bangladesh Bureau of Statistics (BBS) data.

On the other hand, the point-to-point inflation rate rose to 7.54 percent in November from 6.86 percent in October 2010 despite declining prices of non-food items.

Dr. Ahmed has also sought coordinated efforts among monetary, fiscal and trade polices to curb inflationary pressure on the economy.

“Coordination among monetary, fiscal and trade polices is required to help curb rising inflationary pressure and achieving higher economic growth,” he said, adding that the central bank should ask the banks to discourage imports of unnecessary items.

BBN/SSR/AD-01Feb11-2:10 pm (BST)