2022-08-01 16:22:51 BdST
Pvt sector credit growth rebounds to 13.6pc in FY22
The just-concluded 2021-22 fiscal year ended with an optimistic private sector credit growth, showing signs of economic recovery from the corona crisis.
Private sector credit growth stood at 13.66 percent in June, the highest in more than three and a half years, according to the latest Bangladesh Bank data.
In June last year, the growth was 8.35 percent because of corona impacts. June 2022’s growth was even higher than former governor Dr Fazle Kabir’s prediction of 13.1 percent.
Economic analysts say the continuous fall in taka’s value against the US dollar has contributed to higher growth in private credit.
The private sector had to spend additional money in local currency to open letters of credit (LC) because of the high dollar price in the local market, they explained.
At the end of June of 2021-22 fiscal, total private sector credit stood at Tk 13,512.35 billion, which was Tk 10,972.67 billion in the last month of FY2020-21.
Despite the rise in private sector credit, the growth remained 1.14 percentage points lower than the monetary policy’s projection of 14.80 percent.
After corona’s first onslaught in the country in March 2020, the private sector credit growth started slowing down. At one point, it slumped to 7.55 percent in May last year, the lowest in the country’s history.
The central bank data suggest the growth rose to 24 percent in 2009-10 fiscal year and at one point it went past 25 percent. It always had remained above the double-digit mark before the corona pandemic.
The credit growth started falling after hitting 13.20 percent in January 2019.
It came down to a single digit for the first time at 9.83 percent in December 2019 and the private credit maintained the single-digit growth for the subsequent two years.
The growth rate stood at 11.07 percent in January this year, but dropped to 10.72 percent in February after the start of the Russia-Ukraine war.
But the growth was showing signs of some improvement from the following month as it surged to 11.29 percent in March. Private sector credit grew by 12.48 percent in April and 12.94 percent in May.
“The credit flow in the private sector was on the rise for the last few months supported by the stimulus loans offered by the government for corona recovery,” believes Dr Ahsan H Mansur, executive director at Policy Research Institute (PRI).
Besides, a favourable investment climate was prevailing in the country after the economy returned to normal, he said, adding that the banks are also responding to investors’ new plan on the news of the opening of large infrastructure projects like Padma bridge, Metro rail and Karnaphuli tunnel.
“Now, the credit flow has got some momentum. The credit volume also grew thanks to more spending on LC opening due to unusual hike in US dollar price,” he also observed.
A congenial atmosphere for investment is prevailing in the country. The credit flow was gradually rising after the corona situation became normal. Although it faced a hiccup in February after the Russia-Ukraine war. It improved in the later months, according to central bank high officials.
The central bank officials, however, attributed the higher credit growth to the import of capital machinery, intermediate goods and other industrial materials.
They expected that the dollar price will come down thanks to different measures taken to contain high imports.
Unauthorized use or reproduction of The Finance Today content for commercial purposes is strictly prohibited.