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private sector enough credit for massive investment to help chase a higher
growth target and cautioning that the power and gas crisis coupled with
infrastructure deficiency might constrain quick economic development. The
policy statement for six months to December forecasts the gross domestic
product growth at 6 per cent — higher than budgetary projection of 5.5 per
cent — and the average rate of inflation at 6.5 per cent for this fiscal.
The private sector credit growth has been projected at 16.7 per cent
under the new monetary policy dubbed simultaneously 'proactive and
accommodative.' 'I assure the private sector that the government will
ensure flow of as much credit as they need to make productive investment.
This is a clear signal,' said Bangladesh Bank governor Atiur Rahman,
allaying the fears that higher public borrowing could limit credit to the
private sector. The policy projected public sector credit growth at 25.3
per cent, up from 24.5 per cent in June 2009. The central bank is even
ready to finance investment projects, if they are considered feasible and
worthy, from the foreign exchange reserve. It may bring certain changes
in the monetary policy approach to discourage imports of luxury items so
that the inflationary pressure could be eased, the governor pointed out.
'Deficiencies in gas, electricity and infrastructure supports are key
constraints to accelerating economic growth. And addressing the
infrastructure deficiencies and speeding up growth in various sectors will
depend crucially on capacity for efficient implementation of development
programmes,' said the governor. Asked how the central bank would utilise
the foreign exchange holdings for investment purposes, Allah Malik Qazemi, a
senior consultant of the bank, said approximately $500 million could be
invested without disturbing the balance of payments during the projected
period. The central bank will now play the role of a real regulator
instead of an adviser to compel the banks to slash down interests on lending
due to their unwillingness to do so, he said indicating a policy shift to
help increase investment. 'We the central bank are an adviser to the
government and we can do one or two things to show the path of investment
alongside keeping inflation in check,' said the governor. Asked about
higher growth projection in spite of conservative estimate announced in the
national budget, Atiur, himself a development economist, said the growth
might exceed the official projection, should the private sector respond to
budgetary steps and global economy recovery early. 'The private sector
credit growth at 16.7 per cent is projected in keeping with GDP growth and
inflation. Credit will not be a problem for investment,' said Ziaul Hassan
Siddiqui, deputy governor of the central bank. Dwelling on the risks of
global financial crisis, the Bangladesh Bank projected two scenarios, saying
that a prolonged recession might affect remittances, investment and economic
growth while an early recovery might cause commodity price hike triggering
inflation in Bangladesh as well. 'Fostering cultural attitudes relying
predominantly on equity- based rather than debt-based investments and on
disposable income-based rather than credit- based consumption may be better
safeguards of financial stability than arrays of regulations of ever
increasing complexity,' the monetary policy suggests. The governor
mentioned that the central bank would monitor the unfolding domestic and
external developments, and would stand ready to intervene appropriately to
meet challenges for macroeconomic stability and for an inclusive economic
growth. Announcing monetary policy in advance twice a year has been a
practice of Bangladesh Bank for the last few years in an effort to tailor
the financial instruments to the government's overall development
priorities.
