BUILD’s Comments on Monetary Policy Statement

For the first time, the yearly Monetary Policy Statement (MPS) has been announced electronically for FY 2021-22, an expansionary and accommodative policy with some specific steps to mitigate the damage done in the economy by the COVID-19. Considering the COVID situation and lack of assertiveness of investment businesses, MPS targeted private sector credit growth at 11% and 14.8% for the first and second half of FY 2022, while the public sector credit growth target is 30.6% and 32.6%, respectively. Due to COVID, there has already been a significant negative impact on employment. Lower interest in credit growth in the private sector could further impact the country’s employment situation.

A significant share of the micro, cottage and small entrepreneurs are informal businesses that are suffering because of the small amount of monetary support. Bangladesh Bank’s policies to support these segments need to be more comprehensive.

The country needs to promote investment and ensure maximum utilization of the existing SPs as well as the Credit Guarantee Schemes for the immediate rescue of CMSMEs. The government may announce a specific 2nd round of SPs with an allowance for new employment as well as retention of employment for encouraging investors. While there is a huge amount of liquidity in the Banks, there could be a good use of this liquidity in the areas so that the velocity of money increases.

The trade balance shows an adverse trend as it has been widened around USD 3.2bn than the previous fiscal year. This is alarming as, over the last five months, imports remained stuck due to market shock. It should concentrate on policy support to service export which may help to keep the trade balance favourable.

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