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DCCI Reaction on Monetary Policy
Dhaka Chamber of Commerce & Industry (DCCI) expresses concern over Bangladesh Bank’s decision to maintain a contractionary monetary policy in H2 FY2024-25, keeping the policy rate at 10%. While aimed at curbing inflation, this rigid stance hampers private sector credit growth and economic expansion. The private sector relies heavily on banks for investment, and high interest rate raise production cost, fueling inflation. Despite inflation easing to 9.94% in January 2025 from 10.89% in December 2024, it remains above the desired level.
Moreover, DCCI is also concerned about the decision to maintain the private sector credit growth target at 9.8% for January-June FY25, while actual growth fell to 7.3% in the first of 2025, the lowest in 12 years. Meanwhile, public sector credit growth surged from the 14.2% target to 18.1% in December 2024, requiring curbs through austerity measures. To restore private sector confidence and business operations, credit growth must reach double digits. DCCI urges Bangladesh Bank to introduce sector-specific funds and entrepreneurial support programs to boost credit flow, as restrictive monetary policies risk further economic stagnation.
Though the central Bank implemented the market-based exchange rate, yet the traders (export and import) had to buy US dollar at higher price with different rates. This discrepancy must be addressed to ensure consistency, benefiting all stakeholders, including traders and remitters. DCCI criticizes Bangladesh Bank for not taking sufficient steps to strengthen banking governance amid the liquidity crisis and rising NPLs. While the adoption of the ECL methodology under IFRS 9 from 2027 is a positive move, there is a limited focus on implementing governance. Without stronger governance and faster legal resolutions, the banking sector will remain vulnerable, hindering private sector growth and economic resilience.
DCCI urges 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 its economic growth and stability in the days to come.
Published on: 2025-02-10