Monetary Policy For January-June
Pvt sector credit growth target unrealistic amid unrest : UO
The private sector credit growth target of 15.5 per cent set by Bangladesh Bank for the second half of the current fiscal 2014-15 is unrealistic amid the current state of severe political unrest, said Unnayan Onneshan, a local independent think-tank. In a rapid assessment of the monetary policy statement for January-June period of the current fiscal year, UO also said the private sector credit growth was far behind the central bank’s target in the first half of the fiscal year when the political tension was less than the current level.
‘Till November of FY2014-15 when the political unrest did not reach the current level, the private sector credit growth remained far away from the BB target of 14 per cent.
The target of 15.5 per cent for the January-June period, therefore, seems to be unrealistic in view of the current state of severe political uncertainty since January 2015, said UO.
It also said that the trend of shortfall in private sector credit may further worsen the sluggish private investment triggered by current political turmoil, and cause the rate of growth in gross domestic product (GDP) not to reach the target of 7.3 per cent in FY2014-15.
‘The private investment decreased by 4.93 per cent at an annual rate of 2.46 per cent from 2011-12. If this trend continues then private investment as share of GDP will be 20.86 per cent at the end of the current fiscal year,’ it said.
The UO said the BB monetary policy statement is more focused on checking inflation which is restraining the country’s growth.
‘BB is consecutively taking contractionary monetary policy which restrained the credit growth in the country, depressing investment demand and contracting the possibilities of expansion of the economy,’ said the UO.
It also said the country’s inflation, which came down to 6.86 per cent in July-December 2014 against the budgetary target of 7 per cent, is decreasing because of the fall in global oil price.
‘Due to decrease in oil price, the price of imported goods like imported edible oil and milk decreased. So in Bangladesh, inflation is on the downward trajectory with the global inflation rate,’ it said.
The UO said the country’s economy is also witnessing crisis in banking sector due to increase in default loan and huge capital flight due to slack surveillance and oversight.
‘This situation is more upsetting in the State Owned Commercial banks (SCBs) and Development Financial Institutions (DFIs) for which they face huge capital shortfall.
The government recapitalises the shortfall with taxpayer’s money instead of correcting the faults of the institutions which not only increases the burden on taxpayers but also causes a loss to the economy,’ it said.
-With New Age input
