Bangladesh Bank on Thursday unveiled the monetary policy for new fiscal year raising policy rate and slashing private sector credit growth to check inflation through tightening money flow in the market.
The policy rate also known as repo rate has been increased to 5.50 per cent from 5 per cent in the new monetary policy.
Private sector credit growth ceiling has been set at 14.1 per cent for the fiscal year 2022-23 down from 14.8 per cent of the outgoing fiscal year.
BB governor Fazle Kabir announced the policy on the last working day of his over 6-year tenure, on Thursday afternoon at Jahangir Alam Conference Hall of the central bank.
Deputy Governors, chief economist, executive directors and head of Bangladesh Financial Intelligence Unit (BFIU) and other senior officials of BB were present in the event
Kabir said that the central bank has taken a cautious policy stance with a tightening bias in the new monetary policy.
It will introduce a new refinance scheme with subsidised interest rate to increase domestic production of import-substitution for saving foreign exchange reserves, he said.
“There are many products we can make in the country. The present global geopolitical issues and the Russia-Ukraine war are working as an external element for inflation and supply chain disruption. We can face the situation by enhancing domestic agro production,” Kabir said.
The LC margins for luxury goods, fruits, non-cereal foods, canned and processed foods will be increased comprehensively by 75 per cent to 100 per cent to discourage their imports.
BB will continue its support to implement the government’s ongoing stimulus packages alongside BB’s refinance schemes in the face of new adversities, including the Russia-Ukraine war in addition to the Covid-19 pandemic.
The refinance scheme of Tk 3000 crore for lending to the marginal and landless farmers will be implemented 100 per cent to bring them to the production line.
A review of the latest state of the global and domestic economy and the economic impact of recent floods in the northeast shows that the main challenge for the monetary policy for FY2022-23 would be to stabilize the domestic currency’s exchange rate with the US dollar, BB governor said in his speech.
“At the same time, continued support for ongoing economic recovery aimed at job creation is essential for the forthcoming monetary policy,” he said.
Finance Minister AHM Mustafa Kamal, meanwhile, set the government’s GDP growth and inflation targets for FY 2022-23 at 7.5 per cent and 5.6 per cent respectively, he mentioned.
Replying to a query the governor said that though the monetary policy is for a year, it will be reviewed after the first quarter of the year to adjust with the changing situation.
Asked about his tenure he said, “I took the charge in a challenging time and the Covid-19 pandemic also made the challenges more difficult.’
Despite challenges Bangladesh’s economy remained on the right track and his priority was to keep the economy as well as money flow stable as per the situation, Kabir said.
Replying to another query regarding qualification for governor of the central bank he said, the BB has several wings to research and analyze the situations and these departments help the governor to make appropriate decisions. So it is not necessary that the governor has to be from a financial background.
Source: United News of Bangladesh