The Bangladesh Bank’s monetary and credit programmes for the second half of FY23 will pursue a cautiously accommodative policy stance to contain inflationary and exchange rate pressures.
Such steps aim to support desired economic growth, ensuring the necessary flow of funds to productive and employment-generative activities, said the central bank’s Governor Abdur Rouf Talukder while unveiling the MPS at BB headquarters in the capital.
This is his first monetary policy announcement since taking office as governor on July 12, 2022.
While announcing the policy, the governor said that the monetary policy had been made with the aim of curbing inflation by controlling money market flow and interest rates.
In the future, the central bank will work to reduce NPL (non-performing loans) and ensure good governance in the banking sector, he said.
The central bank formulates monetary policy to balance controlling inflation and achieving the desired growth.
Monetary policy is very important in the financial management of the country. Through this, a plan of how much domestic debt, money supply, domestic assets, and foreign wealth will increase or decrease has been presented.
Bangladesh Bank Deputy Governor Ahmed Jamal, Kazi Sayedur Rahman, Abu Farah Md. Nasser, AKM Sajedur Rahman Khan, BFIU Head Masud Biswas, Chief Economist Dr Habibur Rahman, Executive Director, and Spokesperson Mesbaul Haque, and senior officials of the different departments were present.
In the second half of the current FY23, the target of credit flow to the private sector has been set at 14.10 per cent. It was 14.8 per cent in the previous financial year.
However, financing the budget deficit has not reduced public sector borrowing, but increased it by Tk 37.70 per cent.
The repo rate, considered the policy rate, has been increased by 25 basis points to 6 per cent from 5.75 per cent to reduce inflationary pressures, as well as to ensure credit supply for investment and employment.
It means if the banks take money from the central bank for urgent needs, they will have to pay extra interest.
Besides, the reverse repo has also been increased by 25 basis points from 4 per cent to 4.25 per cent. Now keeping money in the central bank, banks will earn more interest than before.
Besides, the money supply target has been reduced from 12.10 per cent to 11.50 per cent.
In the budget for the current fiscal year 2022-23, Finance Minister AHM Mustafa Kamal said that inflation should be kept at 5.6 per cent. But at the end of last November, inflation stood at 8.85 per cent.
The government will go for bank loans to meet the budget deficit. The government is targeting to take a bank loan of Tk 1.6 lakh crore to meet the budget deficit for the fiscal year 2022-23.
This figure is Tk 29,882 crore more than the target of the borrowing in this financial year. In the budget of the current financial year, the target of borrowing was Tk 76,452 crore from the banking system.
