Written by Takie Mohammad Jubayer
Amid record fall in private sector credit demand, the central bank is set to unveil monetary policy statement (MPS) for first half (H1) of this financial year (FY’26) thursday with setting inflation combating target of 6.50 per cent.
Though the country has been passing though economic slowdown for more than year because of factors like post-uprising political uncertainties, lawlessness, severe energy crisis in industrial belts and exchange rate-related shocks, the Bangladesh Bank (BB) is likely to maintain current monetary policy stance with probably keeping the policy rate unchanged at 10.0 per cent.
The central bank governor Dr Ahsan H. Mansur is expected to unveil the key half yearly blueprint for the financial sector though a press conference scheduled to be held (Thursday) at 3.00pm. It will be the second MPS the governor will announce since he took the leadership of the central bank after the changeover in state power following last year’s July-August mass uprising.
Such stance as far as policy rate is concerned would certainly bring no cheer for the businesspeople who have been demanding to lower the policy or repo rate further to give some sorts of respite amid prevailing economic slowdown amid higher NPLs (non-performing loans) regime.
This MPS will be very special because some of the macroeconomic challenges started easing in recent times. The inflationary burden on the common people continues to drop and now stands 8.48 per cent in June, down from May’s count of 9.05 per cent because of continuity of the central bank’s monetary tightening.
On the other hand, the foreign exchange (forex) reserve enhances significantly driven by robust remittance and export inflows and a shift to a market-driven exchange rate. But private sector credit growth becomes an extreme concern as it dropped to a record low of 6.4 per cent in June, which is well below the monetary target of 9.8 per cent.
Seeking anonymity, a BB official said the central bank has decided to keep the policy rate unchanged as the inflation-containing target has not been achieved yet. Consequently, the standing deposit facility (SDF) and standing liquidity facility (SLF) will remain at 8.0 per cent and 11.5 per cent, respectively.
The official said the central bank took the decision reviewing the current macroeconomic situation, challenges and outlook from both domestic and global perspectives. It has projected private sector credit growth to 8.0 per cent by June, 2026.
Responding to a question, the central banker shared the current BB’s stance that the policy rate will be eased once the inflation is brought down below 7.0 per cent.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) President Mohammad Hatem said the lending rate is one the factors that badly impacted business.
“It must be reduced for the sake of ease of doing business,” he said.
Mr Hatem, also the managing director of MB Knit Fashion Ltd, said the central bank keeps the policy rate at 10 per cent but the commercial banks are charging the lending rate as high as 16 per cent.
“We cannot absorb the burden because it is too heavy for business amid the current context of the economic slowdown,” he said, adding that business entrepreneurs mostly suspended their business expansion plans due to some factors and higher interest rate is one of them.
