Monetary policy unfriendly to private sector: DCCI

FE Desk
The Dhaka Chamber of Commerce and Industry (DCCI) on Sunday said the just-unveiled monetary policy is not private-sector friendly.
"As a whole, the H1 MPS (half-yearly monetary policy statement) does not seem to encourage the substantial private sector borrowing and investment as this sector needs to be revamped against the declining FDI trend in private sector of Bangladesh," the chamber body said in a reaction.
The Bangladesh Bank announced its half-yearly (H1 FY2015-16) monetary policy on July 30 aiming to curb inflation and increase investment to support 7.0 per cent growth target and 6.2 per cent inflation target, according to UNB.
"Indeed, the cost of borrowing is still unaffordable to our SME and other  entrepreneurs though central bank forecasts 15 per cent growth in private sector borrowing in this term," said the chamber.
Inflation control is subject to other external economic factors but the higher cost of borrowing, cost of doing business and proposed pay scale may interpolate the expected inflation regulation in the market, it noted.
Offshore financing is being attracted and injected to private sector more than that of local banks and financial institutions on cost of borrowing grounds, which signals apparent weakness in the local financial sector.
Imports grew at 12 per cent whereas export growth was roughly around 3.3 per cent in the just-ended fiscal year.
 The frequent imbalance of the exchange rate of Taka and US dollar may inflate the prices of essential commodities and reduce the purchasing power of money. The increase in import expenditure does not equate to the fall in export earnings.
The DCCI said the proposed MPS does not have any clear indication and direction to recover and minimise the burden of classified borrowing and bad debts in the banking sector.
 BB announces that productive sectors will get loans at lower rate of interest but this will not reap any benefit until other influential factors in money market and economy consistently stabilise and improve in the next two quarters.
The cost of borrowing and doing business need to be "reasonably low" to encourage decent flow of lending for increasing industrialisation, economic mobility towards achieving 8.0 per cent GDP growth as per the vision 2021, and double digit GDP growth by the year 2030.
The BB forecasts public sector credit growth is likely to be at 23.7 per cent this fiscal. The Finance Division has also expressed its worries over excessive government borrowing from the banking sector, which has nearly crossed Tk. 280 billion (28,000 crore) as of July 22 this year.
 "DCCI feels existence of bad loans is a major concern for the economy. As such DCCI opines that slashing rate of interest on lending may fuel investment, both local and foreign," it said.
The DCCI also feels that the MPS doesn't reflect the growth potentials and employment creation opportunities in productive sectors.