Economic activities in Bangladesh may face short-term challenges as the government moves forward with large-scale economic reforms aimed at long-term benefits, according to a recent report from Bangladesh Bank.
The central bank鈥檚 forecast, outlined in its 鈥楤angladesh Bank Quarterly (July-September)鈥� report published on Sunday.
鈥楨conomic activities may slow down in the near term as the government opted to initiate massive economic reform measures, which will eventually benefit the economy in the medium and long run,鈥� it said.
The report highlights the government鈥檚 focus on curbing inflation, which remains BB鈥檚 top priority.
In pursuit of this goal, BB is maintaining its stance of monetary tightening, even though it may put pressure on the country鈥檚 economic activities in the short run.
The first quarter of FY25 saw further tightening measures, with the central bank increasing key policy rates to tackle ongoing inflationary pressures and stabilize the money market.
The hikes in the policy (repo), Standing Lending Facility (SLF), and Standing Deposit Facility (SDF) rates were aimed at keeping the interest rate corridor balanced and signaling a proactive approach to liquidity management.
These rate adjustments have led to an increase in both lending and deposit rates, although the gap between the two remains significant.
To support low-income households, the Trading Corporation of Bangladesh (TCB) is distributing essential products, including five kilograms of rice, two liters of soybean oil, and two kilograms of lentils per month to one crore families.
In addition, authorities are actively addressing hoarding, syndication, and other illegal activities to reduce supply chain disruptions.
BB is expected to continue its contractionary monetary policy until there are clear signs of inflation easing, aiming to manage inflation expectations and bring about a favorable impact in the near term.
The banking sector saw a significant contraction in liquidity during the first quarter of FY25, with a sharp drop in excess liquidity levels. This reduction in liquidity can largely be attributed to slower growth in claims on Domestic Money Banks (DMBs) by Bangladesh Bank.