BB eyes 15.5pc pvt sector loan growth, political unrest a risk

Monetary Policy For January-June
BB eyes 15.5pc pvt sector loan growth, political unrest a risk
Bangladesh Bank on Thursday announced the monetary policy for the January-June period of the financial year 2014-15, keeping unchanged the private sector credit growth at 15.50 per cent despite a sluggish credit demand from the businesspeople due to the recent spate of political violence.
The central bank earlier in July last year set the private sector credit growth target between 14 per cent and 15.5 per cent for the first half and second half of the FY15 respectively and it kept unchanged the target for the January-June of the financial year.
Economists and experts said it would not be possible to achieve the central bank’s credit growth target for the private sector by June, 2015 as the projections of the monetary policy were now pointless considering the country’s ongoing political violence.
BB governor Atiur Rahman, while announcing the monetary policy for the January-June period at the central bank headquarters in the capital, said that political stability was the pivotal factor to achieve the target of the private sector credit growth.
He said that the credit growth in the private sector had remained sluggish in the first few months of the FY15 due to political uncertainty, but it picked up between October-November of the year amid an eased situation in the political zone.
Atiur said political instability came back late December of 2014 and it put an adverse impact again on the private sector credit growth.
The central bank will achieve the private sector credit growth if political stability prevails in the country, he said.
According to the latest BB data, the year-on-year private sector credit growth stood at only 12.67 per cent in 2014, much lower than the central bank target of 14 per cent.
Besides, the central bank continuously failed to achieve the targets of the private sector credit growth for the last two years.
Atiur claimed that the restructuring policy taken by the central bank would help the large borrowers to repay their bank loans and it would generate more employment.
United States, India and Sri Lanka have already prepared such type of policy considering economic interest, he said.
He said, ‘I have already given directions to the BB officials concerned to prepare another policy giving facility to the well-reputed clients as reward for their business skill.’
The well-reputed businesspeople will enjoy rebate facility against their higher rate of interest imposed by banks, he said.
He said, ‘The BB earlier projected that the country’s GDP growth would stand between 6.50 per cent and 6.80 per cent for the FY15. Unfortunately, disruption from the political front has re-emerged, casting shadow on such expectation.’
Atiur said that the BB would continue to give support to the capital market in the second half of the FY15.
The central bank kept unchanged also the annual average consumer inflow target at 6.5 per cent by June of the FY15. The inflation stood at 6.99 per cent at the end of December 2014.
Former interim administration finance adviser AB Mirza Azizul Islam told New Age on Thursday that it would not be possible to achieve the central bank’s credit growth target for the private sector by June, 2015.
Till November, the BB was far away from the private sector credit growth target set for July-December although the country did not face political unrest in the period, he said.
The investors maintained a go-slow policy to business expansion in the period due to political uncertainty, he said.
He said, ‘I think that the projections made in the monetary policy are completely pointless considering the existing political instability,’ he said.
Achieving GDP growth between 6.50 per cent and 6.80 per cent in the FY15 is an overactive imagination considering the political unrest in the country, Mirza Aziz said.
The country will fail to attain such size of growth even if political stability is restored as it (country) has already faced huge losses in recent period, he said.
Dhaka University economics professor MA Taslim told New Age that the economy had faced a standstill situation in the first half of the FY15 despite an absence of political violence.
But, the country is now facing political violence and the unrest will hit the private sector credit growth in the second half of the FY15, he said.
No well-reputed businesspeople will take credit from the banking sector at the moment amid the political unrest, he said.
‘If anyone receives loan right now, he will do so to embezzle the fund,’ he said.
The BB, however, in its monetary policy statement changed the public sector credit growth to 25.30 per cent by June 2015 from 24.8 per cent in line with the government requirement.

-With New Age input

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