Home ›› 30 Jul 2021 ›› Front
Economists have expressed their skepticism over the latest monetary policy statement of the central bank, saying that it lacks directives on excess liquidity or steps to address the pandemic crisis.
The Bangladesh Bank on Thursday unveiled an expansionary monetary policy for the fiscal year 2021-22 to help the economy recover from pandemic fallout. In the Monetary Policy Statement (MPS), BB kept its projection of attaining a 14.8 per cent growth in private sector credit like the previous year.
“There is excess liquidity in the banking sector, but there is no clear direction in the monetary policy on how to invest it. If the private sector credit growth crosses 15 per cent, then the amount of excess liquidity will come down,” Policy Research Institute (PRI) Executive Director Ahsan H Mansur told The Business Post.
Private sector credit growth is not increasing as the banks are not lending the business people money despite a high demand for loans, he added.
If the present trend of private credit growth continues, the excess liquidity in the banks will also continue to grow, said the economist.
“Steps needed to address the Covid-19 pandemic crisis are absent in the monetary policy for FY22. Small entrepreneurs are struggling with cash shortage but there is huge excess liquidity in banks,” Salehuddin Ahmed, former central bank governor, told The Business Post.
But this money could not play its due role in helping the business community, mostly the small ones, said the economist.
Although, Bangladesh Bank also came up with punitive measures against banks with access liquidity, there should be a clear direction where to invest the access liquidity, especially in monetary management and supervision, he said.
“Ignoring these issues, the central bank announced a traditional monetary policy like previous years,” Ahmed said.
However, Atiur Rahman, also a former BB governor, termed the MPS as expansionary, which focuses on economic recovery. He suggested using excess liquidity to ensure cash flow for the small and medium enterprises.
“BB’s monetary policy stance was designed to continue the ongoing expansionary and accommodative mode in supporting present efforts of economic recovery process, while maintaining appropriate cautions for overall price and financial stability,” Dhaka Chamber of Commerce and Industry (DCCI) President Rezur Rahman said.
The FY22 monetary policy has been formulated based on the targeted real GDP growth of 7.2 per cent and general inflation of 5.3 per cent as declared in the national budget.
The public sector credit was targeted 32.6 per cent and private sector credit targeted to 14.8 per cent at the end of the FY22. The target is reasonable for private sector but the recurrent Covid-19 outbreak may hold back the expected target as businesses are not aggressive in new investment, venture amidst this uncertain time, said the business leader.
He noted that to revamp the CMSMEs, a good number of fiscal and non-fiscal assistance were given through various modes.
“But the MPS announced has not given any directives or time-bound roadmap on how to implement these facilities given to the CMSMEs,” he said.
