2020-01-20 18:11:38 BdST
Govt's credit growth target raised for H2
Higher borrowing of the government during the first half (H1) of the current fiscal year (FY20) compelled the central bank to revise the growth rate of the borrowing significantly upward for the second half (H2) of the year.
A meeting of the Bangladesh Bank (BB) monetary policy committee last week made the revision keeping the credit growth rate for the private sector unchanged at 14.80 percent.
The growth of net government borrowing had been set at 24.20 percent for H1 and 24.30 percent for H2 when the monetary policy statement for FY20 had been issued in July last.
After the revision, the net government credit growth has been set at 37.70 percent for H2.
As a result, the target of domestic credit growth has also been re-fixed at 17.40 percent for the January-June period of the current fiscal year against 15.90 percent set earlier.
The net government borrowing posted around 57 percent increase in November last against 35.46 percent in the first five months (July-November) of FY20.
The central bank earlier decided to issue its monetary policy statement annually, a shift from its decade-long practice of half-yearly policy measure.
It has now issued a press statement to announce the latest stance, adopted by the monetary policy committee, for the second half in brief.
Presided over by BB governor Fazle Kabir, the meeting also expressed optimism that the previously-projected 8.20 percent growth of Gross Domestic Product (GDP) would be achievable in the current fiscal year.
The meeting, however, observed that keeping the consumer price inflation rate within 5.50 percent by the end of the fiscal year may be challenging. The improved supply of goods would help maintain the rate within the target, said the central bank press statement issued on Sunday.
The BB has also decided to increase the money supply moderately during the second half of the current fiscal year. So, the broad money growth rate has been re-fixed at 13.0 percent for H2 against 12.50 percent set earlier.
The decision to increase the money supply has been taken without bringing any change in the policy rates and to improve supply to the private sector including the capital market, according to the press statement.
The meeting also observed that due to 2.0 percent incentives on remittance, the inflows would be buoyant in the current fiscal year.
The central bank was of the view that a reduction in the rate of lending from export development funds by 100-basis points would also help post positive growth in export earnings by the end of the fiscal year. Exports declined by 5.84 percent in the first half of the current fiscal year.
It also mentioned that due to increase in foreign borrowing by the government to finance mega projects as well as a surge in foreign direct investment, there would be a $410 million surplus in the country's overall balance of payments by the end of FY20.
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