Businesses frown at monetary policy

Businesses have expressed discontent at Bangladesh Bank setting a private sector credit growth target of 14.1 per cent for 2022-23 that is lower than the just-concluded fiscal year. 

The reduction will be detrimental to the inflow of investment to the private sector, for which the rolling of money in the economy will be lower and jobs will not be generated at the expected level.

As a result, the much-coveted improvement in the private investment to GDP ratio will not come about. The ratio has been hovering at around 23 per cent over the past decade or so, said the businesses.

The private sector credit growth target was set at 14.8 per cent for the fiscal year that ended yesterday. It stood at 12.94 per cent as of May.

However, businesses welcomed the move to curb the import of luxury items as it would definitely help improve the central bank's foreign currency reserves.

They opined that the dollars saved here would help bringing in more basic commodities which was very important in these trying times.

Mostofa Azad Chowdhury Babu, senior vice-president of the Federation of Bangladesh Chambers of Commerce and Industry, said the central bank should have outlined the policy on how to attract more private sector investment.

But, unfortunately, it was reduced, he said.

"So, the expected inflow of private sector investment will not come about to create employment."

Md Saiful Islam, president of the Metropolitan Chamber of Commerce and Industry, said the government should put in all kinds of efforts so that exports keep growing.

Export growth needs to be 50 per cent in the fiscal year 2022-23. But it also should be kept in mind that the country was able to achieve 35 per cent growth in fiscal year 2021-22, which is insufficient for riding out the turbulent times the economy was currently going through, he said.

"If private investment does not take place, employment will also not be generated at the expected level."

During a consultation held in mid-June in Dhaka, Islam had suggested private sector credit growth target be fixed at a much higher level of 15 per cent.

"The proposed monetary policy will reduce the speed at which investment is currently flowing into the private sector, as the government did not give encouragement to business people," said Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association.

Hassan, however, agreed with the central bank governor's forecast that export earnings may not grow that much in the new fiscal year because of higher global inflation and the ongoing Russia-Ukraine war.

The lower private sector credit flow will also squeeze local industrial investment and employment, said Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry.

"It will also make it hard to reach the national budget's private sector investment to GDP ratio of 24.5 per cent, which will have some adverse effects on the economy."

"We think the definition of luxury goods need to be realistically defined for the benefit of business, industry and banks."

Mir Nasir Hossain, a former president of the FBCCI, said as businesses are going through difficulties, the lowering of the credit growth target is discouraging.

He, however, admitted that the credit growth remains much lower than the target every year.

Hossain argues that if higher investment flows in keeping with the improvement of the business environment, the country may face a liquidity crisis.

"So, a higher credit growth for the private sector is expected from the central bank."