The central bank announced on Thursday its monetary policy for the first half (H1) of the current fiscal year (FY) keeping policy interest rates unchanged, although it hinted that it would not hesitate to ease the rates once the inflation falls on a sustained basis.
Bangladesh Bank (BB) Governor Dr Atiur Rahman announced the Monetary Policy Statement (MPS) for the July-December period of the FY 2015-16 at its headquarters in the city.
The MPS is accommodative in supporting productive pursuits. Productive and vulnerable sectors will get loans at lower interest rates.
"This is a growth-supportive policy that promotes investment through strategy of selective easing," the MPS reads.
The MPS said policy interest rates-repo and reverse repo-will remain unchanged at 7.25 and 5.25 per cent respectively.
The BB termed the new MPS 'cautious but explicitly pro-growth' and said it kept the money supply targets lower than those for the last January-June period, arguing that they would be quite supportive for attaining the 7.0 per cent economic growth and keeping inflation at a tolerable level.
It sought to target 14.3 per cent growth in the credit flow to the private sector by December next. The target was 15.5 per cent in June but 13.6 per cent growth was achieved (up to May last).
The governor said: "Both public and private sectors had no financing constraints, as they had both local and external sources."
The target for credit to the public sector also was downsized to 23.7 per cent. The target was 25.3 per cent by June last but it had reached 2.7 per cent negatively (up to May).
The target for supply of broad money or M2 was also downsized to 15.6 per cent by December next.
The actual growth in M2 was 12.6 per cent up to May last against the target of 16.5 per cent.
The target for growth in reserve money (RM) has been fixed at 16.5 per cent by December. The MPS says this is adequate to support growth and the inflation target of 6.2 per cent.
It said the central bank's supervisory vigilance on banking governance will be strengthened further to clamp down on loan delinquencies.
The current financial year would pursue a cautious stance on credit expansion to keep inflation at a comfortable level.
The BB governor said the projected 23.7 per cent public sector credit growth for FY16 was not high in real sense. "It looks high mainly because of negative growth in the last FY".
Replying to a volley of questions, Dr Rahman said income inequality had been falling following inclusive growth.
He said each day the mobile banking transactions were standing at 3.2 million involving over Tk 4.0 billion.
"Around 80 per cent of it goes to rural areas from urban areas," Dr Rahman claimed.
He also said Tk 164 billion set aside for agriculture loans would make the rural economy vibrant.
"The real wage at the rural level surged four times [following inclusive growth].
He said the central bank's MPS was also aimed at providing proactive policy support for financing all productive initiatives, large or small, in all sectors.
For instance, he said, the export sector was accessing low-cost foreign exchange financing from the central bank's US$2.0 billion Export Development Fund (EDF), the size of which was only $200 million in 2006.
Regarding exchange rate management, the MPS suggested continuation of the policy of maintaining a stable exchange rate through need-based intervention like buying or selling dollars.
BB deputy governor Abu Hena Mohd. Razee Hassan made the welcome address.
BB deputy governor Nazneen Sultana said the central bank would introduce real-time transaction monitoring to ensure transparency in export receipts and payment for imports.
Deputy Governor SK Sur Chowdhury, Chief Economist Biru Paksha Paul and Change Management Advisor Allah Malik Kazemi also spoke on the occasion.
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BB unveils pro-growth H1 monetary policy
FE Report | Published: July 31, 2015 00:00:00 | Updated: November 30, 2026 06:01:00
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