The July-December monetary policy statement declared by the Bangladesh Bank is unlikely to be effective in reducing inflation at the desired level as almost all measures, including the policy rate, has been kept unchanged, experts said.
They said that the central bank kept all the parameters of MPS unchanged, despite the inflation rate has remained nearly 10 per cent since March 2023. Inflation hit 9.73 per cent in June.
The central bank aims to bring down inflation to 6.5 per cent at the end of the 2024-25 financial year.
Zahid Hussain, former lead economist of the World Bank Dhaka office, told 抖阴精品 that the new MPS would not be fruitful in controlling inflation.
He said that the exchange rate and the policy rate were kept unchanged in the MPS, which was not rational.
In the MPS, the BB should have provided assessment regarding its failure in controlling MPS, its deficiency in previous policies and thereafter corrective measures in the new MPS, he suggested.
There is a huge gap between policies and implementation, which was another reason for the failure in curbing inflation, he said.
鈥業n one hand, the BB took policy to reduce money supply and stopped printing money for the government, but on other hand, it was regularly providing liquidity support by printing money to weak banks,鈥� he said.
The central bank does not have any effective initiative to fix these weak banks, but it is giving them support for a long period of time, which eventually fuel inflationary pressures, Zahid said.
Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said that the BB should have increased the policy rate by at least 50 basis points in the MPS, which could accelerate inflation reduction.
Due to the sudden sharp hike in policy rate in May, the dollar appeared to be stable at Tk聽118-120 each on the market.
The public sector credit growth has been increased to 14.2 per cent, which means that the government has given more room to borrow from the banking sector.
Mansur emphasised that the Bangladesh Bank should halt printing money to lend to the government and to support certain banks.
On July 18, the Bangladesh Bank declared monetary policy statement for the July-December period of the 2024-25 financial year, keeping almost all previous measures unchanged.
鈥楩or the first half of FY25, the central bank will maintain a cautiously tight monetary policy stance, keeping the policy (repo) rate at 8.50 per cent, the SDF rate at 7 per cent and the SLF rate at 10 per cent unchanged,鈥� the MPS said.
The move may ease rising lending rate which have already increased to nearly 15 per cent, BB officials said.
However, it mentioned some challenges in the country鈥檚 economy.
It said, 鈥楤angladesh鈥檚 near-term macroeconomic challenges include inflation, exchange rate volatility, fiscal constraints and financial sector stability. Addressing these issues requires a multifaceted approach involving prudent monetary policy, effective fiscal management and structural reforms,鈥� it said.
鈥楶ersistently high inflation erodes purchasing power and real incomes, exacerbating income inequalities,鈥� the MPS said.
