Bangladesh Bank (BB) is set to unveil its new monetary policy for the next six months in February, foregoing an increase in the policy rate amid concerns over the rising cost of production and sluggish private sector credit growth, officials said, reports UNB.
They said the central bank's monetary policy advisory board has recommended maintaining the current policy interest rate, citing the adverse effects of previous rate hikes on private credit flow.
The board has suggested that private sector credit growth be maintained within a range of 8.5 to 10 per cent.
A senior official at the central bank's monetary policy department noted that the central bank had raised the policy interest rate three times under the interim government, leading to a decline in private credit flow.
"Further increases in interest rates could negatively impact employment and the manufacturing industry. Hence, it is advisable not to raise the policy rate further," the official said.
According to the central bank data, the policy interest rate was raised five times in 2024, climbing from 7.75 per cent to 10 per cent.
Following the political transition, BB increased the rate by 0.5 percentage points to 9 per cent on 27 August, then to 9.5 per cent on 25 September, and again to 10 per cent on 27 October.
Consequently, lending interest rates have also risen. In May, the lending rate stood at 11.28 per cent, increasing to 11.52 per cent in June and 11.57 per cent in August.
Rubayet Ferdous, a garment entrepreneur from Ashulia, expressed concern over the high borrowing costs.
"Many entrepreneurs are struggling due to increased interest rates, which have escalated the cost of funds. Despite the need for additional financing, many businesses refrain from taking bank loans because of the high costs," he told UNB.
Ferdous highlighted that his firm had planned to commence operations of a new production unit but has been unable to proceed due to the prohibitive cost of funds. "Export-oriented industries are not seeing increased rates from buyers, making it difficult to absorb higher borrowing costs. If the central bank ensures lower-cost funding, many halted projects could resume operations," he added.
