Dhaka Chamber of Commerce and Industry (DCCI) President Barrister Md Sameer Sattar has said the Bangladesh Bank’s monetary and credit programmes (MPS) for the second half of FY23 will help both the private and financial sector to turn around.
The MPS is primarily aimed at curbing inflation and stabilising the foreign exchange reserve, the DCCI president said in a press release received Monday.
Set by the government, the public sector credit growth is at 37.7 per cent for H2 of FY23, which was 26.6 per cent in H1 of FY22. The set target for public sector credit may cripple new borrowing and investment by the private sector.
In order to reduce public sector borrowing, efficiency and good governance need to be continuously ensured through reduction in government expenditure by way of austerity measures and prioritising between development projects, the release added.
Also, in the current market condition, the proposed relaxation of lending rate cap for consumers’ credit and complete removal of the deposit floor rate may encourage savings and smoothen the liquidity reserve of banks.
Regarding the exchange rate stability, Barrister Sattar said he is relieved to see that the central bank hopes to gradually move towards a market-based, flexible and unified exchange rate regime by the end of this fiscal year.
To avoid trade-based money siphoning, he supports the decision of the regulator to beef up its monitoring to track import letter of credit (LC)s before making any final payment. Also, it will be helpful to pre-inspect any LCs which are worth $3 million or more.
However, in the given economic scenario, the DCCI president suggested relaxation of the LC margin for essential commodities and industrial materials for catering local and export-oriented industries.
Regarding inflation control, the MPS has addressed some key issues especially relating to CMSMEs.
Barrister Sattar hails the initiative of the regulator with regards to the refinance scheme of more than Tk 50,000 crore, prioritising investments in agriculture, CMSMEs and import substituting industries, allowing them to avail term loans and working capital loans easier.
It will certainly help the quick revival of CMSMEs, Sattar said.
However, Barrister Sattar was hoping for solid recommendations by the central bank in order to deal with Non-Performing Loans (NPL). This is because maintaining low NPL and ensuring good governance practices are critical for maintaining financial sector stability.
The MPS could benefit from more concrete and clear measures or instructions from regulators as to how the NPL can be effectively reduced.
Since the growing NPL is limiting the private sector credit and, in turn, stalling private sector growth, Barrister Sattar feels that stern measures for quick loan recovery should be brought into place.
The Bangladesh Bank can identify and pinpoint the reasons, focusing on habitual defaulters, and start engaging with various institutions and stakeholders in order to work towards reducing the current backlog in recovery cases along with quick reforms to the existing laws.
Barrister Sattar hails the decision of the central bank to establish a Special Monitoring Cell for continuous review and oversight of big loans as part of a comprehensive NPL resolution mechanism.
Regarding inward remittance from wage earners, the move of waiving documentary requirements in relation to remitting foreign exchange, money transfer fees by local banks as well as prior approval for withdrawal of money mentioned in the MPS are welcome.
As a whole, the declared MPS is promising with good indications to contain the current economic challenges, the release adds.
However, a timely implementation strategy through coordinated efforts from the public and private sector along with strong monitoring by the central bank can achieve the core goals of money market and economy, said Barrister Sattar.
