The central bank in the upcoming monetary policy will focus on driving domestic demand until the global economies recover, said a senior Bangladesh Bank (BB) official.

The BB for the first time is consulting different stakeholders, including chamber bodies, banks and businesses, before formulating the new biannual monetary policy to be announced in January.

“The policy will focus more on raising domestic demand. We didn't formulate such a detailed policy before,” said Habibullah Bahar, economic adviser to the central bank.

The BB released in July an expansionary monetary policy statement for a six-month period up to December.

The policy took a stance to extend credit to agriculture, small and medium enterprises (SMEs), rural economy, housing, shipbuilding and rural energy.

However the country is facing a sharp decline both in global and domestic demand despite the BB's expansionary monetary policy. Banks are overflowed with cash and finding no avenues to invest in, mainly due to energy crisis.

According to BB statistics, private sector credit growth went down to below 14 percent in September, the lowest in the last two years. The credit growth was 14.26 percent in August.

The banks lent private sector, including companies, flat buyers, consumers, farmers and traders, Tk 27,200 crore in September this year, while the figure was over Tk 41,800 crore in the same month a year ago.

Even a sharp cut in repo rate from 6.5 percent to 4.5 percent could not stimulate private sector demand. By repo the central bank sells money to the commercial banks.

Inflationary pressure is also mounting in the wake of a hike in commodity and fuel prices in the global markets. International Monetary Fund has also hinted a rise in inflation that may reach a double-digit level at the end of the year.

“The new policy will help generate inward-oriented demand and employment,” the BB economic adviser said.

He said raising domestic demand will be prioritised as the global recovery is lingering.

The policy will give importance to the SMEs and agriculture to boost demand, he added.

sajjad@thedailystar.net