The Dhaka Chamber of Commerce and Industry (DCCI) has expressed concern over Bangladesh Bank's decision to maintain a contractionary monetary policy in the second half of the 2024-25 fiscal year, keeping the policy rate at 10 percent.

While aimed at curbing inflation, this rigid stance hampers private sector credit growth and economic expansion, the leading chamber said.

The private sector relies heavily on banks for investment, and high interest rates increase production costs, fuelling inflation.

Despite inflation easing to 9.94 percent in January 2025 from 10.89 percent in December 2024, it remains above the desired level.

Moreover, the DCCI is also concerned about the decision to maintain the private sector credit growth target at 9.8 percent for January-June FY25, while the actual growth fell to 7.3 percent in early 2025, the lowest in 12 years.

Meanwhile, public sector credit growth surged from the 14.2 percent target to 18.1 percent in December 2024, requiring curbs through austerity measures.

The credit growth must reach double digits to restore private sector confidence and business operations, the trade body said.

The Dhaka Chamber urged Bangladesh Bank to introduce sector-specific funds and entrepreneurial support programmes to boost credit flow, as restrictive monetary policies risk further economic stagnation.

Though the central bank implemented a market-based exchange rate, traders (both exporters and importers) still had to buy US dollars at higher prices with varying rates.

This discrepancy must be addressed to ensure consistency, benefiting all stakeholders, including traders and remitters, the chamber said.

The DCCI criticised Bangladesh Bank for not taking sufficient steps to strengthen banking governance amid the liquidity crisis and rising non-performing loans.

While the adoption of the Expected Credit Loss (ECL) methodology under IFRS 9 from 2027 is a positive move, there is limited focus on implementing governance, the trade body said.

The chamber believes that without stronger governance and faster legal resolutions, the banking sector will remain vulnerable, hindering private sector growth and economic resilience.

The DCCI urged Bangladesh Bank to adopt a more flexible and balanced monetary policy, closely monitor its impact on inflation and growth, and implement targeted measures to boost private sector credit flow.

By fostering a conducive environment for investment and ensuring macroeconomic stability, Bangladesh can achieve economic growth and long-term stability in the days to come.