Bangladesh Bank on Thursday announced a ‘balanced’ monetary policy for January-June, easing slightly money supply in the final year of the current government.
The central bank governor, Atiur Rahman, while unveiling the six-monthly monetary policy statement said that they tried to strike a balance between GDP growth and containing of inflation in their policy stance.
The MPS projected that the broad money supply in the market would be 17.7 per cent by June 2013, slightly up from the BB’s earlier projection of 16.5 per cent.
The target of credit growth in the private sector for the six months has been set at 18.5 per cent from its earlier projection of 18 per cent.
The BB has set 20.3 per cent credit growth in the public sector by June 2013 from its earlier projection of 20.8 per cent.
As the central had pursued contractionary monetary policy in the last two years, the private sector credit growth came down to 16.55 per cent in December, even below the BB’s projection of 18.30 per cent.
‘The new monetary policy stance has been designed to ensure that the credit envelope is sufficient for productive investments to support the attainment of the government’s FY 13 real GDP growth target while keeping it consistent with the targeted 7.5 per cent average inflation rate for FY 13,’ said Atiur at a press conference at the central bank headquarters on Thursday.
Asked whether the GDP growth would be 7.2 per cent as projected by the government while the central bank’s projection is between 6.1 and 6.4 per cent, Atiur said that the credit growth they had projected would be sufficient to meet the GDP growth target.
He, however, said that the real GDP growth in the 2012-13 fiscal was unlikely to be less than the average of the previous ten years and might fall below the government target of 7.2 per cent.
Asked whether they increased the money supply target ahead of the general elections, Atiur said that they worked independently in formulating the MPS.
‘Even the government does not know till now what we have included in the MPS,’ he said.
About the increased money supply target he said, ‘BB has created further space in its monetary programme in case there is greater lending appetite for productive purposes during the second half.’
He announced a cut in repurchase agreement rate by 50 basis points to increase money supply.
The BB governor stressed that the central bank remains committed to bringing down inflation further and also to avoiding ‘asset price bubbles’, hence will encourage banks to use the space for private sector growth for productive purposes, rather than speculative purposes.
He said that the financial institutions should play an important role in implementing the monetary policy accurately, besides stability in the financial sector was also essential in this regard.
The BB has recently taken a number of measures to tackle the embezzlement in the banking sector, he said.
As part of the move, the BB would start ‘special diagnostic audit’ on quarterly basis in the state-owned banks and the reports would be published to all, he said.
Under the new monetary programme, the BB has set the overall domestic credit growth at 18.9 per cent by June 2013 from its earlier projection of 18.6 per cent.
After the FY 2010-11 and FY 2011, the BB started taking contractionary monetary polices to contain soaring inflation.
The private sector credit growth stood at 24.2 per cent in the FY 2009-10, 25.8 per cent in the FY 2010-11, and 19.7 per cent in the FY 2011-12, the BB data showed.
-With New Age input
