Monetary policy should be favorable for economic revival, said experts
Economists have urged the central bank to announce guidelines on ways to re-generate the economy and generate employment in the upcoming monetary policy statement (MPS) for the fiscal year 2020-2021.
Bangladesh Bank (BB) will unveil its monetary policy for the fiscal year 2020-2021 at the end of this month.
The central bank has already taken opinions online from stakeholders for the formulation of MPS for the entire fiscal year, said a high official of the central bank, who is directly involved in the formulation of MPS.
The central bank governor will announce the monetary policy statement (MPS) for the fiscal year 2020-2021.
They are very cautious and putting extra emphasize on the formulation of MPS for the fiscal year 2020-2021 because the country’s economy is passing a critical period owing to the coronavirus pandemic, he added.
The country’s economic activities remained halted for around two months from March 29 to May 30 when the country went through a shutdown.
However, the government withdrew the countrywide shutdown on May 31, but economic activities are yet to be restored as most businesses suspended their operation.
As a result, the economic growth of the country would plunge to 3.8% in FY20 while the government’s budgetary projection was 8.2%.
Monetary policy favourable for economic revival
Talking to Dhaka Tribune, former Bangladesh Bank governor Salehuddin Ahmed said that re-generating the economy is the key challenge in the upcoming MPS for the fiscal year 2020-21. The monetary policy should be balanced with the fiscal policy,
This year the monetary policy will have to be expansionary so that the private sector credit growth will rise for regenerating the economic activities, he added.
As per Bangladesh Bank data, the private sector credit growth stood at 8.86% in May, which is much lower than the target of 14.8% for the fiscal year 2019-20.
The MPS should emphasis on labour intensive industries for employment generation and the monetary policy statement will have to guidelines for easy terms for Small and Medium Enterprises(SME) loans, the former BB governor mentioned.
Salehuddin Ahmed said that the monetary policy should not be announced for the entire fiscal year, rather it should be announced for six months.
It is not necessary to announce big targets in monetary policy; the central bank should emphasis on the implementation and banks need to be scrutinized to speed up the implementation of stimulus packages to revive the economy, he added.
This time the monetary policy will be especially challenging -- owing to the economic fallout created by the coronavirus pandemic, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
He said that the incentive packages announced by the government are implemented through the banking channels and the central bank has injected a huge amount as liquidity in the market, the issues will be observed cautiously in the upcoming monetary policy statement.
The monetary policy should be expansionary but checking inflation especially the food inflation would be vital, he also said.
The central bank should give attention to implementing the stimulus packages properly to revive the economy, said Ahsan H Mansur, also the chairman of Brac bank.