Bangladesh Bank is going to take another contractionary monetary policy for January-June of 2013 with a view to tackle inflation, said central bank officials.
The BB is likely to announce the tight monetary policy on January 30 for the fourth time in a row, a central bank official told New Age on Wednesday.
Bangladesh Bank is going to take another the contractionary monetary policy ignoring a longstanding demand by the local businessmen and economists that the BB should increase the private sector credit growth at the range of 22 per cent to 25 per cent.
Under the monetary programme for July-December, the central bank set 18.3 per cent credit growth for the private sector by December 2012 and 18 per cent by June 2013.
BB data showed that the credit growth in the private sector had decreased to 19.68 per cent in FY 2011-12 from that of 25.84 per cent in FY 2010-11. The private sector credit growth in FY 2009-10 was 24.2 per cent.
The credit growth in the private sector decreased to 18.38 per cent in October 2012 from that of 19.88 per cent in the previous month due mainly to lower import growth in the period.
A BB senior consultant told New Age that the credit flow to the private sector in November and December, the data of which are not published yet, might decrease below 18 per cent due to the lower money supply by the central bank.
The government set a target to contain the average inflation rate at the range of 7.50 per cent for the financial year 2012-13.
The country’s average inflation rate stood at 10.62 per cent in FY 2011-12. The inflation rate was 8.80 per cent in FY 2010-11 and 7.31 per cent in FY 2009-10.
Under the circumstances, the BB is going to take the tight monetary policy, said the official.
Former BB governor Salehuddin Ahmed said the private sector investment would plunge in a crisis if the central bank took another contractionary monetary policy.
He said, ‘There is a question that whether the contractionary monetary policy contain the upward trend of inflation.’
The government recently said that it would increase the price of petroleum products further which would push the non-food inflation, he said.
The BB is going to take the contractionary monetary policy prescribed by the International Monetary Fund, he said.
The BB should increase the private sector credit growth to promote the overall domestic investment, the former BB governor said.
When asked whether the credit growth to the private sector would be increased, BB chief economist Hassan Zaman said the BB would make the final decision in this regard after getting the inflation data of last December from the Bangladesh Bureau of Statistics.