Dhaka, Jul
18 The Bangladesh Bank has announced the new monetary
policy for Jul-Dec period aiming to 'contain inflation and support' the
targeted growth of 7.2 per cent.
"Bringing down the inflation to 7.5 percent will be the major challenge," the central bank Governor Atiur Rahman said while announcing the Monetary Policy Statement for Jul-Dec on Wednesday.
"Given the on-going global economic slowdown, there are significant downside risks for Bangladesh's export and remittance, and therefore for the GDP growth target," the statement said.
The central bank also predicted that profits of commercial banks might be affected this year but overall liquidity and credit supply would not be hampered.
Average annual inflation remained at 10.6 percent while primary estimate showed that GDP growth was 6.3 per cent in the just concluded financial year (Jul2011-Jun2012).
The private sector credit target has been fixed at 18.3 percent, while the broad money growth would be 16.5 per cent – considering 7.5 percent inflation, 7.0 percent growth and 1.8 per cent money velocity.
The officials said the central bank would keep an eye on government borrowing to ensure available liquidity in the market and steps would be taken to ease pressure on primary dealers.
Lower profits for banks
The Bangladesh Bank predicted that the country's commercial banks would see dip in their profits to new loan provisioning system.
Deputy Governor S K Sur Chowdhury said the new provisioning system would be implemented from September and it might have adverse impact on banks' profits in the first and second quarters but it would be adjusted in the later period.
Under the new system, the banks will have to keep provision at a rate of 20 percent if a borrower fails to repay instalments for three consecutive months. Earlier, the provisioning was required if borrowers failed to repay six instalments.
Exchange rate
The central bank would continue to support a market-based exchange rate while seeking to avoid 'excessive' foreign exchange rate volatility.
"The monetary policy stance also aims to preserve the country's prevailing external sector stability," the statement said.
"Bringing down the inflation to 7.5 percent will be the major challenge," the central bank Governor Atiur Rahman said while announcing the Monetary Policy Statement for Jul-Dec on Wednesday.
"Given the on-going global economic slowdown, there are significant downside risks for Bangladesh's export and remittance, and therefore for the GDP growth target," the statement said.
The central bank also predicted that profits of commercial banks might be affected this year but overall liquidity and credit supply would not be hampered.
Average annual inflation remained at 10.6 percent while primary estimate showed that GDP growth was 6.3 per cent in the just concluded financial year (Jul2011-Jun2012).
The private sector credit target has been fixed at 18.3 percent, while the broad money growth would be 16.5 per cent – considering 7.5 percent inflation, 7.0 percent growth and 1.8 per cent money velocity.
The officials said the central bank would keep an eye on government borrowing to ensure available liquidity in the market and steps would be taken to ease pressure on primary dealers.
Lower profits for banks
The Bangladesh Bank predicted that the country's commercial banks would see dip in their profits to new loan provisioning system.
Deputy Governor S K Sur Chowdhury said the new provisioning system would be implemented from September and it might have adverse impact on banks' profits in the first and second quarters but it would be adjusted in the later period.
Under the new system, the banks will have to keep provision at a rate of 20 percent if a borrower fails to repay instalments for three consecutive months. Earlier, the provisioning was required if borrowers failed to repay six instalments.
Exchange rate
The central bank would continue to support a market-based exchange rate while seeking to avoid 'excessive' foreign exchange rate volatility.
"The monetary policy stance also aims to preserve the country's prevailing external sector stability," the statement said.
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