Reaction of DCCI on Half Yearly Monetary Policy

DHAKA, Jan. 28 (Xinhua) — Bangladesh Bank has declared the new Monetary Policy Statement (MPS) for the second half of the current fiscal year on 27 January, 2014. The new MPS emphasized on enhancing investment and reducing inflation in the country. In the declared monetary policy, private sector credit growth has been targeted at 16.5 percent which was 15.5 percent in the previous MPS that target could not be achieved entirely. Dhaka Chamber of Commerce and Industry (DCCI) feels that the high rate of interest on bank loan and contemporary political instability were one of the major factors behind non-achievement of that target. So, Bangladesh Bank should take effective steps in achieving the target of private sector credit growth through reducing the SPREAD of interest rate of the commercial banks. From the monetary policy, it is known that the target of public sector credit growth has been increased to 22.9 percent from the existing 19.5 percent. In the monetary policy of first half of the current fiscal year, the government borrowing from the banking sector was targeted to 260 billion BDT. It is heartening that upto the first half of the current fiscal, government has taken credit of BDT 46 billion only from banks. DCCI thinks that Bangladesh Bank should handle the issue carefully so that the targeted amount cannot be exceeded. It has also been reported in the statement that remittance and export growth sluggishness may affect the Balance of Payment (BoP). We feel that Bangladesh Bank, Ministry of Expatriates’ Welfare and Overseas and Ministry of Commerce should take coordinated effort in this regard.

The policy has projected that the GDP growth rate of current year will be around 6 percent though the targeted rate was 7.2 percent in the national budget of current fiscal year. DCCI thinks that considering global economy and domestic political and economic viewpoint the projection of Bangladesh Bank regarding GDP growth is realistic. One of the main objectives of monetary policy is inflationary control. In view of this, Bangladesh Bank has set the target of bringing down the inflation to 7 percent from the existing inflation of more than 7.5 percent. We found that the inflation of food item was 9 percent in December, 2013. It is imperative that there is no alternative to reduce the food inflation with a view to reducing the overall consumer inflation. Bangladesh Bank has given special attention in providing adequate agriculture loan and we hope that this initiative will have positive impact on reducing the inflationary pressure. But we have to wait for some time until the downward flow of food inflation take place.

DCCI thinks that the declaration of policy benefits as like: loan rescheduling facility, extending the loan sectors for importing materials from Export Development Fund (EDF) and reducing interest rate will be helpful in bringing back the confidence of entrepreneurs and investors.

The new MPS encourages the deposit-based small investors in getting loan and avoiding the risk associated with loan. DCCI hopes Bangladesh Bank will play a cautious role in this regard. DCCI feels that the MPS emphasizes the large corporate and conglomerates to raise their funds from capital market through issuing equity and debentures instead of getting loan from banks which will create positive impact in reviving the capital market.

Dhaka Chamber of Commerce and Industry (DCCI) believes that the newly declared investment-friendly and cautious MPS will assist in reaching the internal and external economic indices to a positive place with a view to reducing inflation and achieving the targeted economic growth.