Private sector credit growth in Bangladesh fell for the second consecutive month in January amid Bangladesh Bank's initiatives to contain inflation through money-supply contraction and import tightening because of forex scarcity.
According to the latest statistics of the central bank, the growth rate declined to 12.62% in January, 2023 from 12.89% in December 2022.
The decline comes at a time when it was moving towards the BB's target of 14.1% set for fiscal year FY23.
According to Bangladesh Bank (BB) data, the growth of formal credit to the private sector started rising in March last year when the rate was 11.29% cent.
The credit flow had been on an upturn since, growing in April to 12.48%, May 12.94%, June 13.66%, July 13.95% and in August to 14.07%.
After the upward trend, the credit growth to the private sector was 13.91%, 13.91% and 13.97% recorded in September, October and November respectively.
Financial analysts said that the dip is a reflection of the central bank's shift to a contractionary monetary policy to squeeze the private-sector-credit growth designed to control the inflationary pressure on the economy.
They also say the BB's belt-tightening measures to protect foreign-exchange reserves by strictly monitoring LCs might be a prime cause behind the fall in private-sector credit growth.
The letter of credit (LC) opening in seven months to January this fiscal year fell nearly 25%, year-on-year, to $39.46 billion amid forex crunch.
The country's gross reserve continues declining to reach $32.30 billion on Thursday last.
The forex reserve crossed the $31 billion mark for the first time in September 2016 and reached $48 billion in August 2021.
