The monetary policy is an investment-friendly and pro-growth one, but warrants a stable political situation to deliver necessary impetus to the economy.
Stakeholders were of the opinion about the Monetary Policy Statement (MPS) Bangladesh Bank announced on Monday, yet skeptical whether the present political stability would continue in the days ahead.
Their apprehension over the political stability emerged as they though the situation might turn bad any time in the near future due to a controversial election through which the present government assumed office.
Bankers, businesses and stock market stakeholders expressed their views over the MPS for the second half of the current fiscal year, which aims at boosting investment and economic growth that saw a spate of political violence late last year.
NCC Bank Managing Director Nurul Amin termed monetary policy investment friendly. “But Bangladesh Bank should focus on boosting growth rather than maintaining inflation target.”
He said achieving the credit growth target depends on political stability. If the present situation does not continue in next six months, he said, the target could not be achieved. “The government borrowing might remain limited subject to increase in the revenue income and sales of national savings instruments,” he said.
Pubali Bank Managing Director Helal Ahmed Chowdhury said the central bank kept private sector credit growth unchanged, which is positive.
“But it totally depends on political situation.” He was, however, skeptical about restoring investment-friendly climate.
IDLC Investment Managing Director Md Moniruzzaman said confidence of the entrepreneurs has not yet returned. “So, it will be very tough to implement the monetary policy.”
He said Bangladesh Bank has encouraged the large scale borrowers to raise fund from the stock market, which is good. “But it will not bring any result in the short term.”
Dhaka Chamber of Commerce and Industry (DCCI) said the private sector credit growth has been targeted at 16.5%, which was 15.5% in the previous MPS, which could not be achieved entirely.
“It feels that the high rate of interest on bank loan and contemporary political instability were one of the major factors behind non-achievement of that target,” it said in a statement issued yesterday.
So, BB should take effective steps in achieving the target of private sector credit growth through reducing the spread of interest rates, it said.
The target of public sector credit growth has been increased to 22.9% from the existing 19.5%. DCCI thinks that BB should handle the public bank borrowing carefully so that the targeted amount cannot be exceeded.
The policy has projected that the GDP growth rate of current year will be around 6% though the targeted rate was 7.2% in the national budget of current fiscal year.
DCCI thinks that considering global economy and domestic political and economic viewpoint the projection of BB regarding GDP growth is realistic.
DCCI feels that the MPS emphasises the large corporate and conglomerates to raise their funds from capital market through issuing equity and debentures instead of getting loan from banks which will create positive impact in reviving the capital market.
Chittagong Stock Exchange President Al-Maruf Khan said there is nothing new in the latest monetary policy, which can have adverse impact on the capital market.
“The monetary policy speaks of liquidity supply and asks big borrowers to raise fund from the market. This is also not new,” he said.
But the bottom line is that rules never implemented. Banks usually give waiver to the large scale borrowers for financing their projects, he said.
Lanka Bangla Securities in its analysis said monetary policy does not have much to say about the capital market. “If external equilibrium remains positive, this monetary policy will be accommodative for the capital market. As current private sector credit demand is low, rising excess liquidity in the banking system will keep interest rates down and may find its way into the risk assets slowly.”
It said BB has indicated facilitating institutions like private equity or venture capital as sources of finance. “These sorts of institutions are experts in making equity investment and maturing seed companies.
Facilitating these sorts of specialised companies will be helpful for the long term development of capital market.”
