Monetary policy expansionary, but conventional: DCCI
Dhaka Chamber of Commerce and Industry (DCCI) thinks the monetary policy announced today for fiscal year 2021-22 is more or less expansionary and accommodative but a conventional one considering the current Covid-led economic situation.
The policy largely aimed at rebounding the Covid-19 implications on various avenues of overall macro-economic conditions of the country.
The public sector credit growth was targeted at 32.6 per cent and private sector credit growth 14.8 per cent at the end of fiscal year 2022, which is apparently a bit optimistic.
The recurrent coronavirus outbreak may hold back the expected target, as businesses are not aggressive in new investment amidst this uncertain time.
If the overall economy and private sector ecosystem does not improve or recover, this target cannot be realised, the leading chamber said in a statement today.
The government has allocated a budget of around Tk 1.28 trillion for social safety net, which may force the government to borrow more to manage core economic operations and other expenses that may affect private sector credit flow.
The private sector credit flow was recorded at 8.4 per cent at the end of fiscal year 2021.
The weak and shattered business environment, supply chain system around the world affected new investment, weakening private sector credit flow as a whole.
It is worth pointing that almost 90 per cent cottage micro small and medium enterprises (CMSMEs) are operating at reduced capacity having limited intention to invest in most instances.
On the other hand, the current account balance looks little better compared to the previous years as export growth was quite substantial that recorded 15.2 per cent growth accompanied with substantial remittance earning.
To improve the capital market, repo rate from existing 6 per cent to 4.75 per cent applicable for creating a special investment fund of Tk 2 billion to be constituted by each bank for investing in the stock market beyond their market exposure limit.
However, to revive the capital market confidence no substantial directives or course of action was seen.
To encourage investment in capital market, the return of investment or interest on savings certificate, postal saving and pensioners' saving certificate need to be rationally reduced at par bank instruments like fixed deposit receipt, and return from bond, equity like a level playing field.
But these are missing in the monetary policy, the chamber said.
For revamping the CMSMEs, a good number of fiscal and non-fiscal assistance were given through various mode.
But the monetary policy announced has not given any directives or time-bound roadmap on how to implement these facilities given to the CMSMEs.
The exchange rate of the Taka against US dollar was not vulnerable. Rather value of taka appreciated in some instances that helped to maintain sustenance in international trade of the country.
The monetary policy is as usual and there is no innovative approach or course of actions especially to motivate the private sector.
However, focused course of action and coordinated implementation techniques of banks, non-bank financial institutions in financial sector and other regulatory stakeholders backed by strong monitoring of central banks are needed down the road.