Despite economic headwinds, Bangladesh has witnessed a robust growth in the private sector credit during the first half of the current fiscal year 2022-23 with securing the second highest position as compared to the neighbouring countries.
According to latest the monetary policy statement (MPS) for January-June 2023 unveiled by Bangladesh Bank on Sunday, the country saw 12.8 per cent growth while neighbouring India witnessed 13 per cent, the highest among the cross-country.
Besides, Vietnam’s credit grew by 11.6 per cent, followed by Indonesia 10.5 per cent and Pakistan 9.6 per cent as of December last, the central bank data showed.
The central bank in the MPS said, “The private sector credit growth has been strong during H1 of FY23 due to the reversion of momentum in the economic activities after overcoming the impact of the coronavirus pandemic, with an increase in commodity prices in the global market in the presence of a substantial depreciation of the local currency against dollar.”
Similarly, the increased global fuel prices have raised the cost of implementing the government’s mega projects. The relatively lower amount of government borrowings from non-bank (sale of national savings certificates) and foreign sources have significantly increased the amount of public sector credit provided by the banking system, it added.
“It is mentionable that the private sector credit growth, which presumably reflects the private investment at national level, increased reasonably well in Bangladesh compared to many other emerging and developing Asian economies,” the MPS said.
The private and public sector investment activities, partly reflected through the private sector credit growth and the implementation of various government mega projects, remained buoyant in H1 of FY23.
The private sector credit rose by 12.76 per cent year-on-year in December 2022 against an increase of 10.68 per cent during the same period of last year.
The central bank has taken various initiatives, including continuous liquidity support to the conventional banks through repo and assured liquidity support facility and the introduction of an Islamic bank liquidity facility (IBLF).
Nonetheless, some banks, particularly Shariah-based Islamic banks, have been facing liquidity pressure during the last couple of months.
As a result, the banks’ total excess reserves and excess liquid assets declined from Tk 26,876 crore and Tk 2,03,435 crore at the end of June 2022 to Tk 6,591 crore and Tk 1,53,177 crore at the end of November 2022 respectively.
The central bank in its monetary policy statement for FY2022-23 had set the private sector credit growth target at 13.60 per cent till December and 14.10 per cent till next June of this fiscal year.
