It's not right time to follow tight monetary policy: Aziz

FE Team | Published: September 13, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

FE Report
Finance and planning adviser Mirza Azizul Islam said Wednesday the contractionary monetary policy has not been followed over the past couple of months because of the prevailing economic situation.
"The central bank has not pursued the contractionary monetary policy over the last two months," the finance and planning adviser told reporters after a meeting with visiting International Monetary Fund (IMF) officials at the planning ministry.
Although the Bangladesh Bank (BB) has adopted a tight monetary policy it has not been following the policy due to a sluggish private sector credit growth.
"This is not the right time to pursue a contractionary monetary policy," the finance and planning adviser admitted.
He added: "The IMF officials have also echoed the similar view."
The IMF officials, however, expressed doubt about achievement of the revenue collection target, especially by the Value Added Tax (VAT) department.
On Wednesday, the Washington-based multilateral agency offered technical assistance to improve the collection of VAT as it observed that the VAT department might not be able to achieve the target due to sluggish import and business activities.
But the finance and planning adviser disagreed with the IMF observation saying that it was too early to make such assessment about the performance of the VAT department.
"Only two months have passed in the current fiscal year. It is too early to make any comment," he said.
He said the IMF should rather come up with technical assistance for the Income Tax (IT) department.
The National Board of Revenue (NBR) has already turned down a number of IMF suggestions relating to introduction of joint audit on income and VAT departments and imposition of turnover tax on new and small businesses.
The caretaker government (CG) has already taken initiatives and held dialogues with the leading businesses to restore their confidence. It is worried about the fall of the private sector credit growth by 3.0 percentage points.
According to the finance and planning adviser, the private sector credit growth recorded at 15 per cent in fiscal 2006-07 compared to 18 per cent in the previous fiscal year.
Azizul Islam pointed out that the contractionary monetary policy should not be blamed for the fall in private sector credit growth. The lack of demand by the local investors is responsible for it, he added.
To a query, the finance and planning adviser said the caretaker government has taken steps to overcome supply side constraints to tame the inflation that crossed double-digit mark in July last.
The CG has taken initiatives to import commodities through Bangladesh Rifles (BDR) and involve small importers in trade to improve supply situation in the local markets.
Azizul Islam said continuous rise in prices of essentials, including rice, wheat and edible oil, was due to price hike of the commodities in the international market.