Home ›› 30 Jul 2021 ›› Front
The Bangladesh Bank (BB) will continue its expansionary monetary policy for the current fiscal year to help the economy, battered by coronavirus, recover.
In its Monetary Policy Statement (MPS), BB said the country achieved 6.1 per cent GDP growth in 2020-2021 fiscal year, higher than last year’s estimated 5.2 per cent growth.
It hinted at taking policy action in case the current excess liquidity situation deteriorates further.
It targeted credit growth of 14.8 per cent for the whole of FY 2021-22, although the credit growth was only 8.4 per cent in the last FY due to sluggish business activities amid the pandemic.
Like last year, BB unveiled the MPS on its website on Thursday. The MPS said BB would continue its current expansionary monetary policy stance to support investment and employment-generating activities and help create enabling conditions for the businesses to normalise production and supply chains.
The MPS, however, expressed pessimism in economic recovery hit by the new variant of coronavirus.
“However, the outlook projects a high degree of uncertainty as new virus mutations are taking place, and the accumulating human losses are growing, particularly in many emerging market economies,” reads the policy.
The central bank credited the government and BB’s policy intervention for the more than estimated economic expansion in the last fiscal year.
“Despite the current shock of Covid-19 and consequent measures in terms of mobility restrictions and natiowide lockdown, preliminary estimates suggest that Bangladesh economy has attained around 6.1 per cent real GDP growth in FY21, significantly higher than last year’s estimated growth of 5.2 per cent, supported by reasonably healthy growth performance in agricultural and industrial sectors aided by the government and BB’s growth supportive unprecedented policy measures,” the MPS said.
It hinted at taking corrective policy measures to address the huge liquidity in the banking sector.
“In light of the recent macroeconomic development, it appears that owing to the ongoing expansionary and accommodative monetary and fiscal policy stances, the banking system has already been inundated with historically high levels of surplus liquidity, though growth of some other monetary and credit aggregates remained relatively slow mainly due to Covid-19 related uncertainties,” reads the statement.
“In case of any unexpected price pressure development or formation of any erratic asset price bubbles due to the presence of ample excess reserves in the banking system, BB will take appropriate policy action any time if situation warrants.”
Surplus liquidity in the banking sector stood at Tk 2,31,462 crore as of June, up 66 per cent year-on-year, as per BB’s latest data. Experts said that the excess liquidity should be controlled.
BB said credit demand will pick up in the coming months with the expectation that the economy will reopen soon as the pandemic containment measures are underway.
“BB’s cautiously designed expansionary and accommodative monetary policy stance along with the implementation of ongoing various stimulus packages on top of low base effect is likely to augment the private sector credit growth to its programme level,” the MPS said.
Bangladesh Bank Governor Fazle Kabir, in his written speech, said that the central bank is always vigilant to ensure that the significant surplus liquidity is not channeled into
unproductive sectors instead of productive sector.
BB will take appropriate measures to monitor transactions and remain vigilant to address the financial crimes and fraudulent activities in aid delivery in Covid-19 situation, the MPS said.
Kabir said that BB has already asked banks to increase their vigilance and take precautionary measures to ensure that the incentive packages are not used for any other purpose.
“The BFIU (Bangladesh Financial Intelligence Unit) continues to take major initiatives to increase financial intelligence activities to curb corruption in the financial sector and prevent money laundering,” he said.
Kabir said BB would consider adopting all possible policy options for encouraging new entrepreneurs and generating employment opportunities. These include continuing the ongoing refinance policy with more focus on micro, small and labour intensive medium- enterprises.
“Against the backdrop of the pandemic, the basic challenges that BB may encounter in the coming months are restoration of full normalcy in life and extending required fund flow to production pursuits, especially those which have become inoperative causing some degree of job and income losses,” the governor said.
“To this end, BB will attach huge emphasis on full implementation of the government’s stimulus packages, alongside strengthening its own refinancing windows in the coming days.”
