The Bangladesh Bank has downgraded public sector credit growth in the revised monetary policy for second half of current fiscal year assuming that government borrowing will slow down from banking system in the next six months.
In the revised monetary policy, public sector credit growth ceiling revised down to 31.7% from previous target of 44.4% for June this year.
However, Bangladesh Bank continued its expansionary monetary stance keeping private sector credit growth at 14.8% when credit demand remained depressed at 8% level since corona virus struck the country.
Public sector credit growth was downgraded because pressure on sales of saving instrument remained high, said Dr. Md. Habibur Rahman, executive director (research) of Bangladesh Bank.
As a result, government borrowing will slow down from banking system which already reflected in current trend, he said.
"We do not think that government can fulfill its borrowing target from banking system in the next six months."
However, Bangladesh Bank still remained in expansionary mood so that market remains with adequate liquidity supply, he said.
If inflationary pressure appears, then necessary measure will be taken, he said.
During July-November 2020, government borrowing from the banking system stood at Tk.3124.9 crore which was Tk.40,646.5 crore during the same period of the previous year.
The borrowing amount was far below from the budgetary target of Tk 84,980 crore, according to central bank data.
On the other hand, the net sale of national savings instruments stood at Tk.19,044 crore during July-November, 2020 which was Tk.5,841.6 crore during the same period of the previous year.
In press release on the revised monetary statement sent on Tuesday, the Bangladesh Bank hopped that inflation will remain in target of 5.4% in this fiscal year.
However, it projected that world inflation may rise which may have little pressure on domestic inflation.