The country’s credit growth rate in the private sector increased slightly in April from the previous month but still remained very low as businesspeople continued with their wait-and-see policy because of ongoing political uncertainty.
According to Bangladesh Bank data released on Thursday, the year-on-year credit growth rate in the private sector stood at 11.86 per cent in April compared with that of 10.46 per cent in March.
Bangladesh Bank officials said that although the rate rose slightly in April, it still remained well below the target of 16.50 per cent to be achieved by June as per the monetary policy.
Credit flow to the private sector stood at Tk 4,92,409.70 crore in April 2014 against Tk 4,40, 218 crore in the same month of 2013. It was Tk 3,90,663.80 crore in April 2012.
The lower credit growth in the private sector has already put an adverse impact on the GDP target for the FY14 as Bangladesh Bureau of Statistics projected that the country’s GDP growth was 6.01 per cent this fiscal year, much lower than the initial target of 7.2 per cent, a BB official told New Age on Thursday.
The businesspeople are yet to start expanding their business due to existing political uncertainty which curbed the expected credit growth in the private sector, they said.
‘In the proposed budget for the FY15, the finance minister on Thursday set the GDP growth target of 7.3 per cent, but it will be a tough job for the government to attain the goal due to the ongoing sluggish investment trend’, he said.
In a post budget analysis, the country’s leading think-tank Centre for Policy dialogue on Friday said it was an impossible target to attain the 7.3 per cent GDP growth as the government would have to ensure 25 per cent private investment-GDP ratio.
The CPD said it would need a private investment of around Tk 75,000 crore in a single year to ensure four per cent growth in private investment-GDP growth.
Only political stability will push up the private sector credit growth otherwise the business people will continue to show reluctance to initiate new business, the BB official said.
Bangladesh Bureau of Statistics data earlier showed that private investment hit a seven-year low at 21.40 per cent in the FY14.
The private investment as a proportion of gross domestic product decreased to 21.40 per cent in the FY14 from 21.70 per cent in the FY13.
The private investment-GDP ratio stood at 22.50 per cent in the FY12, 22.20 per cent in the FY11, 21.60 per cent in the FY10, 21.9 per cent in the FY09, 21.7 per cent in the FY08 and 21.01 per cent in the FY07.
Dhaka University economics professor MA Taslim told New Age on Friday that the country’s private sector faced a major setback in recent years due to extreme economic mismanagement.
The financial sector faced a number a scams in the last few years which discouraged businesspeople to expand their business, he said.
Former caretaker government adviser Mirza Azizul Islam told New Age that people were worried due to downward trend in law and order situation in the country.
Under the circumstances, the country’s business sector is yet to rebound from an unfriendly situation, Aziz said.
Against the backdrop, the credit growth in the private sector still remained very low.
The BB data showed that the credit growth in the overall domestic sector increased to 10.93 per cent in April 2014 compared with that of 8.31 per cent in the corresponding month of 2013.
The total credit in the domestic sector in April stood at Tk 6,18,748.40 crore against Tk 5,57,781.60 crore in the same month of 2013.
-With New Age input
