Contractionary stance will hamper private sector growth: DCCI
It noted that the private sector relies heavily on banks for investment, and high interest rate raise production cost, fueling inflation
Dhaka Chamber of Commerce and Industry (DCCI) has expressed concern over Bangladesh Bank's decision to maintain a contractionary monetary policy in H2 of 2024-25 fiscal year, keeping the policy rate at 10%.
"While aimed at curbing inflation, this rigid stance hampers private sector credit growth and economic expansion," the chamber said in a press release today (10 February).
It noted that the private sector relies heavily on banks for investment, and high interest rate raise production cost, fueling inflation.
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Despite inflation easing to 9.94% in January 2025 from 10.89% in December 2024, it remains above the desired level.
Moreover, the DCCI also expressed concern 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.
It stated that 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, said the leading chamber.
The DCCI urged the 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," it said.
The chamber also criticised Bangladesh Bank for not taking sufficient steps to strengthen banking governance amid the liquidity crisis and rising NPLs.
It 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 its economic growth and stability in the days to come," it added.
