The private sector credit growth inched up in August from that of the previous month but still remained lower than the monetary policy target as the businesspeople maintained their ‘wait-and-see’ investment policy amid political uncertainty. According to the Bangladesh Bank data released on Sunday, the year-on-year credit growth rate in the private sector rose to 11.39 per cent in August compared with that of 11.25 per cent in July of this year.
BB earlier set a private sector credit growth target of 14 per cent by December.
Officials said the credit growth rate in the private sector slightly increased in August as the country’s import payment rose significantly in the first two months of this financial year.
The imports increased by 11.98 per cent to $6.42 billion in July-August of the FY15 against $5.73 billion in the same period of the FY14, according to the BB data.
The officials said that although the credit growth rate rose slightly in August, it still remained below the target of 14 per cent to be achieved by December as per the monetary policy.
Credit flow to the private sector stood at Tk 5,13,083.32 crore in August 2014 against Tk 4,60,618.70 crore in the same month of 2013. It was Tk 5,07,838.40 crore in July 2014 against Tk 4,56,476 crore in the same month of 2013.
The private sector credit growth stood at 12.27 per cent in the last financial year, much lower than the BB-set target of 16.50 per cent as the businesspeople were reluctant to expand their business due to the political violence in the period, a BB official said.
The private sector credit growth also hit a 14-and-a-half-year low at 10.60 per cent in December of 2013. The growth was 16.61 per cent in the same month of 2012.
Against the backdrop, the central bank has taken a lower private sector credit growth of 14.50 per cent for the FY15 against 16.50 per cent for the FY14, the BB official said.
The lower credit growth in the private sector put an adverse impact on the GDP target for the FY14 as Bangladesh Bureau of Statistics projected that the country’s GDP growth was 6.12 per cent in the FY14, much lower than the initial target of 7.2 per cent, the BB official said.
The violent political conflicts in the first half of the FY14 over the process of holding general elections hit the private sector, he said.
In the situation, the businesspeople had adopted a ‘wait and see’ approach to expansion of their business in the period, he said.
The BB data showed that the year-on-year credit growth in the overall domestic sector slightly increased to 11.36 per cent in August 2014 against 11.05 per cent in July of this year.
The total credit in the domestic sector in August stood at Tk 6,47,225 crore against Tk 5,81,205.90 crore
in the same month of 2013. It was Tk 6,45,828.90 crore in July 2014 and Tk 5,81,562.90 crore in July 2013.
The BB official, however, said that the credit growth rate in the domestic sector was yet to pick up due to a slower pace in implementation of the annual development programme.
He said that the government had significantly declined its borrowing from the banking sector in recent months that also played a role in decreasing the overall credit growth in the domestic sector in August.
-With New Age input
