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H2 MPS to focus on job creation

Policy rates likely to remain same

Siddique Islam | December 25, 2018 00:00:00

The central bank has started taking preparations to formulate its next monetary policy, giving top priority on creating employment opportunities through boosting financing in the productive sectors.

The priority was suggested at an internal preparatory meeting on the monetary policy statement (MPS) at Bangladesh Bank (BB) headquarters in Dhaka on Monday, with Governor Fazle Kabir in the chair. All general managers (GMs) and senior officials attended the meeting.

The meeting reviewed the country's overall economic situation, and suggested that the next MPS for second half (H2) of the current fiscal year (FY), 2018-19, should be inclusive growth-oriented, keeping inflation within the target.

The MPS is likely to be announced in the last week of next month, officials said.

The officials hinted that policy rates, including CRR (cash reserve requirement) and Repo, may remain unchanged for H2 of FY 19.

In the next MPS, BB may focus on boosting micro, small and medium enterprises (MSMEs) and agriculture loans along with micro-credit to create employment opportunities across the country, they added.

The meeting also emphasised ensuring the quality of credit through strengthening monitoring and supervision by the central bank.

"Around 15 per cent credit growth to the private sector is enough for achieving 7.80 per cent GDP (gross domestic product) growth by the end of this fiscal year," the central banker opined.

But the quality of credit should be ensured, he added.

The private sector credit growth rose to 14.72 per cent in October 2018 on a year-on-year basis from 14.67 per cent a month ago, according to BB's latest statistics.

The private sector credit growth was 14.95 per cent in August 2018.

The growth was more than 2.0 percentage points lower than the BB's target of 16.8 per cent for H1 of FY 19.

The meeting also suggested bringing down the volume of classified loans in the banking sector to ensure effectiveness of the proposed MPS, they added.

The amount of non-performing loans (NPLs) rose by nearly 34 per cent or Tk 250.67 billion to Tk 993.70 billion as on September 30, from Tk 743.03 billion as on December 31, 2017, the BB data showed.

The meeting also reviewed the existing inflationary trend in the economy, suggesting that BB should continue its supervision for keeping the inflation within the target.

Meanwhile, the inflation came down to 5.58 per cent in November on annual average basis from 5.63 per cent a month before, according to data of Bangladesh Bureau of Statistics (BBS).

The government had set the inflation target at 5.6 per cent for FY 19.

Food inflation stood at 6.37 per cent in November 2018 as compared to 6.52 per cent in the previous month, while non-food inflation rose to 4.38 per cent from 4.26 per cent.

"Food inflation may fall further in the coming months following higher production of food grains," another BB official opined.

The latest situation of capital market along with foreign exchange and money markets will be considered in the next MPS, they added.

"The next MPS could be a capital market-friendly one," another BB official hinted.

The central bank will also help ensure access to finance for marginal people through boosting financial inclusion campaigns across the country, he added.


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