by Naim-Ul-Karim
DHAKA, July 26 (Xinhua) -- The central bank of Bangladesh Wednesday unveiled its monetary policy for the first half of the current 2017-18 fiscal year ending next June, focusing on price stability, economic growth and employment generation.
Bangladesh Bank (BB) said the half-yearly monetary policy from July to December 2017 is designed to support the government's policies and programs in pursuit of faster inclusive economic growth and poverty reduction.
Unveiling the policy at a press conference, BB Governor Fazle Kabir said the new monetary policy aims at facilitating short-and medium-term macroeconomic management, with monetary and financial policies promoting socially responsible financing, facilitating attainment of the government's near-and longer-term inclusive, environmentally sustainable growth objectives.
BB said the half-yearly Monetary Policy Statement (MPS) outlines recent domestic and external economic and financial sector developments.
By balancing the output and inflation risks for the economy over the next one year, the program will target monetary growth path aimed at keeping average inflation around 5.5 percent, it said.
According to the bank's Monetary Policy Statement, the downside risks to the growth and inflation projections that form the basis of monetary program are hard to fully capture in the econometric models. The risks to the growth outlook from the modest global growth and weaker remittance flows, and the inflation risks from any rise in food price and its spillover into non-food inflation need to be closely monitored, it said.
The central bank said it will update its forecasts on a regular basis during the course of the year and adjust monetary program accordingly to accommodate any significant change in the baseline scenario.
In line with the government's inclusive, environmentally sustainable growth goals, BB said it has been taking up countrywide schemes promoting financing of MSME (micro, small and medium enterprises) initiatives in the agriculture, manufacturing, and services sectors to stimulate creation of new output, employment and income.
According to the bank's statement, the market-based exchange rate of taka has responded to the turnaround of BoP (Balance of Payment) current account balance from surplus to deficit in FY17, depreciating by around 3 percent against U.S. dollar.
Looking ahead, output growth momentum remains robust, but low 2016-17 fiscal year export growth (1.7 percent) and workers' remittance inflow downturn (-14.5 percent) pose risks to external and domestic demand-led growth outlook for 2017-18 fiscal year, BB said.
It said food price uptrend caused by the Q4 of the last 2016-2017 fiscal year flash flood in the haor (a vast stretch of turbulent water) regions pose some risk for inflation outlook. Some mitigation of the domestic inflation risks can be expected from subdued global inflation upheld by the onset of monetary tightening in the United States and the EU, coupled with low inflation prevailing in neighboring India.
BB's fiscal 2018 monetary program seeks to set a prudent, flexible course towards containing 12-month average CPI inflation within targeted 5.5-percent ceiling while supporting attainment of the 7.4-percent GDP growth targeted by the government.
BB's fiscal 2018 monetary program sets Domestic Credit (DC) growth ceiling at 15.8 percent, a level consistent with the growth and inflation objectives, accommodating ample (16.3 percent) growth of credit to private sector and a lower (12.1 percent) growth for credit to public sector because of the latter's large access to non-bank (NSCs) borrowing.
The central bank said monetary policies will continue policy supports for financing of farm/non-farm MSME output initiatives, with realigned greater emphasis on the employment-focused manufacturing and service sub-sectors, and for "green" projects of adopting environmentally benign output practices.
Other recent BB initiatives include Foreign Direct Investment (FDI) facilitation through dedicated help-desks/support units in banks.
Net inflow of FDI in Bangladesh's Export Processing Zones shrank by about 2 percent to 300.26 million U.S. dollars in the first nine months of the past fiscal year 2016-17 fiscal year, according to the latest statistics released by the central bank recently.
