Monetary policy investment-friendly but cautious
Dhaka: Continuing its earlier strategies, Bangladesh Bank on Sunday unveiled its second half yearly (January-June 2017) monetary policy statement (MPS) to support the government's target to achieve 7.2 percent GDP growth.
The central bank, however, issued a cautionary note to banks about financing in the country's capital market which recently witnessed an upward trend after years of stagnancy.
"Bangladesh Bank will constantly monitor banks' investments in the capital market under ‘capital market exposure law’ and oversee the banks' lending to share investors so that no one could violate any rules," Governor Fazle Kabir told reporters while announcing the MPS at the central bank conference room.
"Banks will have to monitor whether their loans are utilised properly for the selected sectors or they are going to capital market for exaggerated profits," he said adding that it might be essential to impose a bar on the loans against excessive price-earning (PE) ratio shares to control their abnormal rise.
Rejecting an idea to conduct a ‘diagnosis’ about the capital market as its monitoring mechanism, the governor said the capital market regulator Bangladesh Securities and Exchange Commission (BSEC) has already made advice for the market.
The MPS says most indicators of the economy are on the right track and the country is going to achieve the targeted 7.2 GDP growth. Even, some economists believe the GDP growth may exceed the target as well if everything goes well, it said.
It said the remittance inflow, which is now witnessing downtrend, may go up as there is a prediction that oil price may go up again in the global market.
"We hope, the remittance inflow will see a growth shortly after its stability against the backdrop of the increase of manpower export in the middle-east market," he said.
The MPS has kept unchanged the internal credit growth target in the second half year at 16.5 percent and private sector credit growth at 16.4 percent as they were set earlier.
About the private sector credit growth, Fazle Kabir said in the first half year’s of MPS, the overall internal credit growth achieved 12.3 percent growth against the target of 15.7 percent, while the private sector credit growth met the targeted of 15 percent against the targeted 16.6 percent until November.
The annual average CPI inflation reached 5.52 percent in December against the targeted 5.8 percent. The same targets have been set for the second half year of MPS, he said.
The governor said the export business achieved a 4.4 percent growth despite a sloth due to backlash against the Brexit and globalisation perspective.
He said the overall balance of payment still maintains a positive trend despite sloth due to decline in the remittance inflow. "But still we have the foreign exchange reserves to meet the import bills of over 8 months," said the governor.
Deputy governor SK Sur Chowdhury and other top officials were present on at the function.