The president of Dhaka Chamber of Commerce and Industry (DCCI) on Wednesday expressed optimism that the new monetary policy for the second half (January-June) of FY2023-24 would be helpful for stabilisation of the country’s macroeconomic condition through its implementation.
In response to the monetary policy announced by the Bangladesh Bank (BB), the DCCI hailed the central bank’s strategy of highlighting the need for ensuring sufficient liquidity to nurture growth sectors while trying to rein in inflation.
In this context, while increasing the public sector borrowing is necessary, the DCCI noted that care must be taken to avoid crowding out the private sector from domestic liquidity, said a press release.
The public sector credit growth target has been set at 27.8 per cent for January-June of FY24, which was realised at 18 per cent against the target of 37.9 per cent in July-December of FY24.
On the other hand, the private sector credit growth has been set by the government at 10 per cent for January-June of FY24, which was realised 10.2 per cent against the target of 10.9 per cent in July-December FY24.
The DCCI urged the central bank to explore more options for increasing liquidity for the domestic banking system and private sector credit growth over the next six months.
In this regard, DCCI President Ashraf Ahmed sought additional measures to increase credit flow to the private sector by an appropriate financial borrowing strategy.
Focus on enhancing availability of trade credit, use of contingents, factoring, etc. may be considered as alternatives to reduce foreign exchange stress as well as increase liquidity, he added.
Ashraf hailed BB for extending support to CMSMEs through pre-financing and re-financing schemes, which should contribute towards nurturing growth sectors.
The increase in repo rate by 25 basis points to 8 per cent is likely to impact money supply, and can impact banking liquidity available for private credit.
The DCCI president believed that the policy rate may help control inflation to some extent through reducing money supply. He also stressed the need for appropriate supporting fiscal policy to be implemented, which can have an equally, if not more prominent, role in reducing inflation.
Regarding the exchange rate stability, he expressed his hope that a return to market mechanism and a crawling peg system will help the balance of payment challenges.
Export Retention Quota (ERQ) percentage have been revised to 7.5 per cent, 30 per cent and 35 per cent, down from the previous 15 per cent, 60 per cent and 70 per cent to enhance foreign currency liquidity in the foreign exchange market.
Additionally, BB has extended the borrowing facility from Offshore Banking Operations (OBOs) allowing DBUs to receive fund up to 40 per cent of their regulatory capital for settling permissible payment obligations.
The DCCI president suggested allowing foreign exchange market to operate properly with limited interventions within well-structured parameters.
He also hoped that the declared MPS will contribute to macroeconomic stability. "We hope the continued focus on controlling inflation and stabilizing the exchange rate in the current MPS will bear fruit," Ashraf added.
