Dhaka Chamber of Commerce and Industry (DCCI) President Ashraf Ahmed on Wednesday expressed optimism for stabilisation of the macroeconomic condition through its implementation.

He said this in response to the monetary policy announced by the Bangladesh Bank for the second half of the fiscal year 2023-24 (January-June 2024)

The DCCI haiB’s strategy of highlighting the need for ensuring sufficient liquidity to nurture growth sectors while trying to rein in inflation. In this context, while increasing the public sector borrowing is necessary, care must be taken to avoid crowding out the private sector from domestic liquidity.

The public sector credit growth target has been set at 27.8% for January-June of FY24, which was realised at 18% against the target of 37.9% in July-December of FY24. On the other hand, the private sector credit growth has been set by the government at 10% for January-June of FY24, which was realized 10.2% against the target of 10.9% in July-December FY24.

The DCCI urged the central bank to explore more options for increasing liquidity for the domestic banking system and private sector credit growth over the next six months. In this regard, the Dhaka Chamber President sought additional measures to increase credit flow to the private sector by an appropriate financial borrowing strategy.

He said that the focus on enhancing availability of Trade Credit, use of contingents, factoring etc. may be considered as alternatives to reduce foreign exchange stress as well as increase liquidity. Ashraf hailed Bangladesh Bank for extending support to CMSMEs through pre-financing and refinancing schemes, which should contribute towards nurturing growth sectors.

The increase in repo rate by 25 basis points to 8% is likely to impact money supply, and can impact banking liquidity available for private credit. Ashraf said he believed that the policy rate may help control inflation to some extent through reducing money supply. He also stressed the need for appropriate supporting Fiscal Policy to be implemented, which can have an equally, if not more prominent, role in reducing inflation.

Regarding the exchange rate stability, the DCCI president expressed his hopes that a return to market mechanism and a crawling peg system will help the balance of payment challenges. Export Retention Quota (ERQ) percentage has been revised to 7.5%, 30% and 35%, down from the previous 15%, 60% and 70% to enhance foreign currency liquidity in the foreign exchange market.

Additionally, the Bangladesh Bank has extended the borrowing facility from Offshore Banking Operations (OBOs) allowing DBUs to receive funds up to 40% of their regulatory capital for settling permissible payment obligations. Ashraf suggested allowing the Foreign Exchange market to operate properly with limited interventions within well-structured parameters.

He also hoped that the declared MPS will contribute to macroeconomic stability. We hope the continued focus on controlling inflation and stabilising the exchange rate in the current MPS will bring results.