The monetary policy for the second half (H2) of the current calendar year (2014) should focus on ways to stabilise inflation and nominal exchange rate, said some leading economists.
They also said the next monetary policy should keep adequate space for private sector credit to help meet the demand for fresh investment.
The Bangladesh Bank (BB) will unveil its July-December Monetary Policy July 27 next.
Dr. Zahid Hussain, lead economist at the Dhaka office of the World Bank (WB) said the central bank needs to employ measures to stabilise inflation and nominal exchange rate.
"Fluctuations in inflation do affect the people in general and the lower income people in particular," Dr. Hussain said.
"Investors also face troubles in fluctuating inflation because of the problem in assessing their investment costs.
For instance, Dr. Hussain said, Bangladesh is now highly dependent on import of both finished products and industrial raw materials.
"Any fluctuation in the exchange rate affects the foreign trade adversely," Dr Hussain noted.
He observed that there were many constraints to lift investment in the country. The monetary policy is an important tool that might help bring about some result in this respect through the stabilisation of inflation and nominal exchange rate.
However, he said, there are many other hurdles to growth of investments, including shortage of land and other serious deficit in infrastructures.
Dr Hussain also laid emphasis on continuity of policies, government or otherwise.
Dr Mustafa K Mujeri, director general of the Bangladesh Institute of Development Studies (BIDS) told the FE that the upcoming monetary policy should ensure adequate space for private sector credit growth.
"This is very much important for annual economic growth target, so the next monetary policy should keep adequate space for the private sector credit," Dr Mujeri said.
The January-June monetary policy statement had a programme of 16.5 per cent credit to the private sector.
Dr Mujeri who served as chief economist of the BB said there is no political turbulence right at this moment but the recovery in the investment remains 'fragile."
"I think the policy should be pro-active in the context of growing private investment"
Dr Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh (PRI) said the next monetary policy should be 'restrained' one to help manage the inflationary pressure amid adequate idle money with the banks.
"I'm not in favour of expansionary monetary policy as it will not yield the desired goal of boosting investment," Dr. Mansur said.
Dr. Mansur said the expansionary monetary policy carries the risk of creating bubbles in the land and capital markets as it did happen in 2010.
"The enormous liquidity favours bubble formation," Dr Mansur noted.
The BB had announced a restrained monetary policy statement for January-June period last. It reached its many targets set in the monetary policy statement including reserve money, broad money and managing net foreign assets.
