The private sector credit from the commercial banks recovered to some extent for a short period of time after almost a year of sluggish trend, riding on the back of increased imports of food items.
The credit growth registered 11.7% year-on-year in July, the first month of the current fiscal year. It grew 11% in the previous month and more than 20% in the same month a year ago, according to Bangladesh Bank figures.
The credit flow to the private sector stood at Tk457bn in July, 2013 against Tk409.7bn in the same month a year ago.
“Food importers may have preferred stockpiling the essential items to avert possible political chaos ahead of the upcoming general election,” said an official. “The rise may be a temporary one because it was not stimulated by productive sector credit.”
Before returning to the positive territory, credit growth to the private sector plunged to a record low a sign of economic slowdown, mainly due to political uncertainty and higher rate of interest.
It continued to reduce for 11 consecutive months from July last through May this year the longest declining streak since 1981 and to a level not seen before 2007.
Imports stood at $3.21bn in July, an increase of more than 12% over the previous month and 8.74% compared to the corresponding month of 2012, pushing the July’s private sector borrowing marginally, the central bank data shows.
Rice import surged to $12.15m in July this year from $1.26m in July last year while wheat import soared $118.10m from $72.32m, sugar to $65.66m from $46.69m, refined edible oil to $43.37m from $20.52m, crude edible oil to $112.60m from $52.98m, and pulses $39.20m from $34.49m.
Import payment in August registered a negative growth of 6% or $2.4bn, which was positive growth of 2.28% or $2.5bn in the same month a year earlier.
“The fall in August import payment indicates that the credit growth in July was just for a brief period,” said an official.
In its latest monetary policy, the central bank cut the private sector credit growth target to 15.5% for the last quarter this year and 16.5% for June next year from 18.3% in December 2012 and 18.5% in June 2013.
“The private credit rose because of higher food imports, but entrepreneurs feel shy for long term investment because of looming political uncertainty,” said Mirza Azizul Islam, finance adviser to the last caretaker government.
“We need private sector investment to increase by more than 30% from the existing 20% of GDP to achieve 7.2% growth estimated in the fiscal targets.”
