Credit flow into Bangladesh's private sector picks up in December as demand for loans, particularly for trade financing, grows for running businesses on a full scale to offset corona fallout.
The credit flow rose to 10.68 per cent-the highest in more than two years-in December 2021 on a year-on-year basis, from 10.11 per cent a month before, according to the central bank's latest statistics.
The similar quantum of growth was back in August 2019-before the SARS-CoV2 virus in a pandemic dimension invaded and upended the planet.
It was 0.32-percentage points lower than the Bangladesh Bank (BB) target of 11 per cent for the first half (H1) of fiscal year (FY) 2021-22.
"The ceiling of private-sector credit growth was almost achieved during the first six months of the current fiscal year mainly due to the reopening of economic activities," a senior official of the Bangladesh Bank (BB) told the FE Monday.
He also says such credit growth has assumed an upward trend after May 2021 following the reopening country's overall business activities. "The rising trend continued until December."
Senior bankers, however, hold mixed feelings about possible private- sector credit growth in January due mainly to the resurgence in Covid-19 transmission in a third wave now.
Talking to the FE, Syed Mahbubur Rahman, Managing Director (MD) and chief executive officer (CEO) of Mutual Trust Bank Limited, predicted that the private credit growth may stay almost at a similar level in January, too.
The quarterly interest accrued also pushed up the private-sector credit growth in December, the senior banker explains.
"Such credit growth may fall slightly in January following the adverse impact of the third wave of the coronavirus pandemic on the economy," Emranul Huq, MD and CEO of Dhaka Bank Limited, told the FE while replying to a query.
The credit growth increased slightly in December mainly due to higher trade financing for settling import-payment obligations, he adds.
Actually, Bangladesh's overall imports have increased significantly in recent months, following gradual reopening of economic activities - both at domestic and global levels - after more than one year, mainly due to the Covid-19 pandemic, according to officials.
Besides, higher prices of essential commodities, including petroleum products, on the global market also pushed up the country's import payments during the period under review, they explained.
Actual import in terms of settlement of letters of credit (LCs) jumped by 53.74 per cent to $30.32 billion during the July-November period of FY'22 from $19.72 billion in the same period of the previous fiscal year.
Besides, the single-month import payments hit an all-time high of $6.0 billion in December 2021 following higher purchase of textile items from the global market to build a satisfactory stock of the capital goods.
Rise in import of capital machinery added up to the import-payment obligations during the period under review, they added.
The settlement of letters of credit (LCs), generally known as actual import, in terms of value, rose by 8.32 per cent to about $6.0 billion in December 2021 from $5.54 billion in the previous month, the BB data showed. It was $5.27 billion in October 2021.
Meanwhile, outstanding loans with the private sector rose to Tk 12,632.47 billion in December 2021 from Tk 11,413.03 billion a year before.
It was Tk 11,888.55 billion in June 2021.
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