Economy to be weaker, no new job creation
Achieving even the projected 14.8 per cent private sector credit growth would be difficult based on the existing unstable state in the banking sector
Lenin Rahman: Declining of private sector credit growth as per recent monetary policy may hinder the overall economic growth of the country, said experts.
Bangladesh Bank has set the lower private sector credit growth target which will affect the industrial production and employment generation in the country, said economists.
According to Global Economist Forum, Bangladesh needs higher industrial production and bumper food production by 2030 to attain a mid-level status country. In another report of the forum, the country needs to ensure zero rates of unemployment and poverty for achieving such status.
Sources of GEF expressed their concern for lower private sector credit growth target as private sector is playing pivotal role for attaining a sustainable economy of Bangladesh. Considering this, the reduction of the private sector credit growth target may affect in achieving 8.20 percent GDP growth for the ongoing fiscal 2019-20, they said.
Meanwhile, Bangladesh Bank (BB) recently announced for the first time a yearly monetary policy instead of a half-yearly one, lowering drastically the private sector credit growth target while raising sharply the public sector credit growth target for the current financial year.
BB governor Fazle Kabir unveiled the monetary policy statement for the FY 2019-2020, breaking with the tradition of announcing half-yearly policy.
The MPS set the private sector credit growth target at 13.2 per cent for the first half (July-December) of FY20 and 14.8 per cent for the full year against the 16.5 per cent growth target set for the previous fiscal year (FY 2018-19).
The public sector credit growth target was set at 25.2 per cent for the first half and 24.3 per cent for the whole year against the 21.1 per cent growth target set for FY19.
Mentioning the monetary policy as ‘cautiously accommodative’, he said that the projected credit growth targets would be sufficient for achieving gross domestic product growth and inflation targets projected in the national budget for the current fiscal year.
He said the GDP growth could be above 8.2 per cent in FY20 considering the attainment of 8.13 per cent economic growth in FY19 with just 11.29 per cent private sector credit growth.
The MPS will also facilitate the government’s budgetary target to keep inflation within 5.5 per cent, he said.
Industry insiders said, Bangladesh has a significant sign of private sector’s active presence, that made the country as highly developing and it is declared as a middle income country as well. Private sector is a sundry group of financial institutions, intermediaries, multinational companies, micro, macro, small and medium-sized enterprises and co-operatives which operate formal and informal sectors and obviously they do have profit-seeking activities. Private sectors are potential for resource and knowledge generation and innovation hub.
Apart from this, NGOs are also contributing a vital role to develop country’s economy. In Bangladesh, private sector is systematized over and done with various business associations, including at city and country levels such as the FBCCI, DCCI, MCCI, etc.
Sector specific associations also exists here, such as the BGMEA, BKMEA, banking sector, leather industry, pharmaceutical industry, cement factories, stone, textile, tourism, plastic companies, food and beverage companies, still and furniture industry and so on are playing leading role as private sector and contribute to Bangladesh economy and allocate their CSR fund for development initiative.
BGMEA started its journey in the late 1970 with a small investment. Readymade Garment sector impact a lot in our economy as large portion of gross domestic product (GDP), and contributes to Gross National Product (GNP) and the sector empowered women financially and brought dignity for them because almost 80 percent workers are women in this sector. The sector is holding the lion share of export of Bangladesh.
Some reputed private sector organizations like Unilever, National Polymer, Bengal Plastic, Social Marketing Company, PRAN-RFL, bKash and many more had participated to a market based program that was an emergency response project of a renowned INGO through their business competencies as; they ensures their product quality, maintained the supply chain smooth and ensured product to the affected community and local market without doing any harm to other.
However, the private sector is leading vital role to generate employment as well as to reduce poverty from the country. In this context, reducing the private sector credit growth is not rational.
Experts have underscored the need for increasing higher money supply in favour of the private sector to attain a sustainable economy of the country.
Talking to Daily Industry, Khondker Ibrahim Khaled, former deputy governor of central bank told that achieving even the projected 14.8 per cent private sector credit growth would be difficult based on the existing unstable state in the banking sector.
He expressed doubt whether the projected credit growth would be sufficient to support the budgetary growth target.
Khaled also apprehended that the private sector credit growth might fall far below the target.
Speaking about the BB’s decision to announce monetary policy once a fiscal year, the former central banker said, ‘Considering the basic principle of projection, MPS twice in a fiscal year is a better option as there are fewer chances of miscalculations. The projection for a full year could result in higher number of errors.’
Policy Research Institute executive director Dr Ahsan H Mansur said that the private sector credit growth projection by the central bank was the reflection of the reality in the banking sector.
Ahsan said that the private sector credit growth could be even lower than the projection.
In general, the existing banking system is not growth supportive, Mansur said, adding that given the current situation in the banking sector, the monetary policy was trying to minimise the impact of the banking sector woes.
Speaking about the MPS once in a year, he said that there should be quarterly review on the monetary policy so that stakeholders could get direction regarding the MPS.
Governor Fazle Kabir said that there was no significance of MPS twice in a fiscal year as the central bank addressed issues when required without waiting for the announcement of MPS.
Banking reform adviser SK Sur Chowdhury claimed that the private sector credit growth had dropped due to the central bank’s emphasis on issuance of quality credit and prevention of aggressive lending.
The private sector credit growth target could be changed midway of the fiscal year if demand for quality credit is found high, he said, adding that the issue of liquidity crisis in a number of banks surfaced due to serious mismatch between assets and liquidity. According to a Daily Industry report, the private sector credit grows by 12.07 percent instead of 16.50 percent standard in April this year.