Private sector credit growth dwindles amid lower demand
SIDDIQUE ISLAM | Friday, 6 December 2024
Private-sector-credit growth fell further in October 2024 mainly due to lower demand, particularly for trade financing, as uncertainty is still prevailing since August 05, bankers said.
The growth came down to 8.30 per cent in October 2024 year-on-year from 9.20 per cent a month ago, according to the Bangladesh Bank's latest statistics.
It was 1.50-percentage points lower than the BB target of 9.80 per cent for the first half (H1) of the
current fiscal year (FY 2024-25).
"Ongoing uncertainty along with higher interest rates has pushed down the demand for fresh credit in recent months," a senior official of the Bangladesh Bank (BB) told the FE on Thursday.
He said political unrest that led to the fall of Sheikh Hasina's government on August 5 last and the severe floods at different parts of the country were also responsible for the lower credit growth.
"The falling trend of private-sector growth may continue in the coming months with the continuation of existing contractionary monetary- policy stance to contain inflationary pressure on the economy," the central banker explained.
Talking to the FE, a senior executive of a leading private commercial bank (PCB) said opening letters of credit (LCs) particularly from the private sector is still lower as the business community has maintained a 'wait and see' policy to avert any financial risks.
The opening of fresh LCs, generally known as import orders, dropped by 1.22 per cent to US$22.33 billion during the July-October period of FY '25 from $22.60 billion in the same period of FY '24.
On the other hand, the actual import in terms of settlement of LCs increased by 1.47 per cent to $ 22.59 billion during the period under review from $22.26 billion in the same period of the previous fiscal year, according to the central bank's latest data.
Political stability along with uninterrupted supply of utilities should be ensured for improving the investment climate of Bangladesh, according to another private banker.
Meanwhile, outstanding loans with the private sector rose to Tk 16.56 trillion in October from Tk 16.52 trillion a month before. It was
Tk 15.29 trillion in October 2023.