BB announces ‘cautiously accommodative’ monetary policy

Unveiling a ‘cautiously accommodative’ monetary policy statement (MPS), Bangladesh Bank (BB) has projected domestic credit growth ceiling at 15.9 percent in the fiscal year 2019-20 (FY20) accommodating 14.80 percent credit growth in private sector and 24.30 percent in public sector, state-run Bangladesh Sangbad Sangstha news agency report said.

“Like in the past, the new monetary policy is cautiously accommodative for achieving the targeted GDP growth and creating employment opportunities,” said BB Governor Fazle Kabir while announcing the monetary policy for FY20 at a press conference at the central bank headquarters on Wednesday.

He said the policy direction for FY20 is to pursue a stance that would provide sufficient monetary accommodation for attaining the government’s FY20 GDP growth target.

“BB’s FY20 monetary policy stance will as always cautiously accommodate monetary and credit expansion needs of all productive pursuits for attaining the FY20 real GDP growth target of 8.2 percent while also keeping CPI inflation contained within the target ceiling of 5.5 percent,” he added.

The BB governor mentioned that risk factors to attainment of FY20 monetary programme objectives will be closely monitored and addressed if and when the need arises.

“As always, BB will in FY20 be closely monitoring both magnitude and direction of credit flows to diverse sectors and subsectors of the economy and continue promotion and support for inclusive, adequate credit flows to under-served sectors or niches promising for job creation in productive pursuits,” he added.

He said the monetary policy stance and monetary programme for FY20 was prepared with dual objectives of maintaining price stability and supporting inclusive, equitable and environmentally sustainable job-rich economic growth in turn with the government’s strategies and goals for sustainable growth and development.

According to the MPS, the policy rates, including CRR (cash reserve requirement), SLR (statutory liquidity ratio), Repo, and Reverse Repo, remained unchanged for the current fiscal year.

Fazle Kabir said priority of green transition of output practices for environmental sustainability will also continue to be in focus. “BB’s refinance support lines for promotion of these priorities in lending will be replenished and expanded as necessary, within the monetary and credit expansion envelope of FY20 monetary programme,” he added.

He, however, observed that the rate of inflation maintained 5.47 percent at the end of the last fiscal (FY19) which is lower than the previous fiscal when it was 5.60 and lower than the targeted limit of 5.5 percent for the fiscal FY20.

Fazle Kabir said BB maintains a good number of refinance lines supporting lending for productive pursuits in various underserved economic sectors and population segments, solely with BB funds or in participation with development partners.

“Bedsides, magnitude of incremental growth, BB’s focus on growth support pursuits are also on such quality dimensions as inclusivity, job creation and environmental sustainability,” he added.

The BB governor said a couple of near term domestic risk factors loom over to fully or partly impair attainment of FY20 programme objectives. “Recent upward revision of fuel gas prices and new VAT law implementation has already imparted some impact on prices in the beginning of FY20, the lingering effect over the coming month remain to be seen,” he added.

He said if the monsoon flood, now engulfing wide expanses of the country, prolongs or recurs, agricultural output losses can be significant.

“Ongoing trade war and geopolitical tensions are uncertainties in the external front that may or may not impair attainment of BBS FY20 monetary programme outcomes,” he added.

Kamruzzaman