New monetary policy announced setting 14.8 percent debt growth
Published: 04:00 PM, 29 July 2020 Updated: 05:17 PM, 29 July 2020
The central bank has announced a monetary policy for the current fiscal year 2020-21 with a debt growth of 14.8 percent. Bangladesh Bank has termed the new monetary policy as ‘expansionary and compact oriented’.
The monetary policy report has been published on the website of Bangladesh Bank on Wednesday afternoon.
In a written statement, Governor Fazle Kabir said 14.8 percent credit growth in the private sector is expected to be enough to recover the economy that was hit by the coronavirus pandemic and achieve the economic growth set by the government. At the same time, public sector debt growth could be 44.4 percent.
The Governor further said that the main objective of the monetary policy for the current financial year is to recover the economy damaged by the coronavirus and to determine the overall management of the financial sector keeping in view the economic growth and inflation targets set by the government.
Considering the potential dynamics of the foreign exchange sector in FY 2020-21, the growth of net foreign assets of the banking system, one of the major components of the money supply, has been set at 5.8 percent, which is much lower than the previous fiscal year (10.2 percent).
Although the growth of net foreign assets is likely to be relatively low in this fiscal year, there is a possibility of growth of net domestic wealth due to expansionary and contractionary monetary policy stance. As such, the target for total domestic debt growth has been set at 19.3 percent. Of this, the growth target of government debt has been fixed at 44.4 percent and the growth of debt in the private sector has been estimated at 14.8 percent. However, in the last fiscal year, even though there was a target, only 8.60 percent has been achieved, which is much less than the target.