Bangladesh Bank is set to announce its monetary policy statement (MPS) for the current 2019-2020 fiscal year on Wednesday.
According to sources, the central bank is going to lower its private sector credit growth target from that for the second half of the previous fiscal year amid tight money flow in the banking system.
BB Governor Fazle Kabir will unveil the MPS at a press conference scheduled to hold at 11.30 am at the central bank’s headquarters in the city’s Motijheel.
Usually, the central bank sets monetary programme for a full year but comes up with announcement half yearly. But this year, it is going to announce the programme for the whole year.
Private sector credit growth, which reflects the private sector investment, is likely to be cut this year to rationalise with real growth.
The credit growth in June this year hit a 58-month low at 11.29 percent, far below from the monetary ceiling of 16.5 percent set for the second half of FY19.
Bangladesh Bank assumed that as the country achieved 8.13 percent growth in its gross domestic product (GDP) even after 11 to 12 percent credit growth in FY19, 16.5 percent target is too high for achieving 8.20 percent GDP growth in the current fiscal year.
Against this backdrop, the credit growth target will be cut to rationalise it with the current credit growth trend, said a senior executive of the central bank.
Bangladesh Bank is going to announce the programme at a time when the banking sector is under liquidity pressure.
In this situation, money management will be the main challenge for the next monetary policy, said a senior executive of a private bank.
Government borrowing is on the rise which already created crowed out for private sector which will eventually hurt private sector investment, he opined.