The Bangladesh Bank is set to announce its new monetary policy for the current fiscal year on the 28th of this month, aiming to boost investment and speed up economic recovery.
Even though private sector credit growth remained almost half of the monetary target throughout the last fiscal year, the ceiling is likely to be kept unchanged in the forthcoming monetary policy.
Private sector credit growth came down to 7.55% in May this year, lowest in recent history, which reflects stagnancy in investment during the pandemic situation.
The monetary ceiling for the last fiscal year was 14.8%.
On the other hand, although inflation is already on the rise, the Bangladesh Bank is likely to continue with its expansionary stance for the current fiscal year.
The central bank took the opinion of its board members in a meeting held Sunday.
When contacted, a senior executive of the central bank said managing inflation will be challenging for this year. Even then, the central bank will prefer an expansionary monetary stance to support investment, he added.
The credit growth space is likely to be kept unchanged to keep money circulation in the market normal, he added.
He further said if investment cannot be cheered, economic recovery will be slower. Therefore, the central bank will keep money supply uninterrupted even after rising inflation, he observed.
Inflation rate surged to 5.64% in June this year, highest in eight months, due to supply shortage amid stagnancy in investment.
Economists say cheap money is also one of the reasons behind a surge in the inflation rate.
Currently, the banking sector is sitting on excess liquidity of around Tk2 lakh crore due to low credit demand.
On the other hand, loan moratorium increased cash on hand as businessmen are enjoying payment deferral, said industry insiders.
A conservative spending behaviour during the pandemic situation piled up deposits in banks. In spite of negative returns, the growth of bank deposits was 14% in May this year.
Well inflow of remittance mainly geared up deposit growth and kept people awash with cash in hand causing rise in inflation.
In this perspective, the central bank will put its effort on boosting up investment by keeping money flow to the private sector, said a senior executive of the Bangladesh Bank.