United News of Bangladesh

Bangladesh Bank is set to announce a new monetary policy on Thursday for the first half of the current fiscal year 2025-26. Meanwhile, the central bank has completed preparation for announcing a new slightly expansionary monetary policy, reducing interest rates to enhance credit flow in the private sector, said a senior official of the monetary policy department. Bangladesh Bank followed a contractionary monetary policy in the last two fiscal years to halt growing inflation. As a result, the private sector credit flow fell below 7 percent in June 2024, due to the high interest rates. A contractionary monetary policy is a type of monetary policy that is intended to reduce the rate of monetary expansion to fight inflation. Bangladesh Bank imposes new dress code with restrictions for employees The business community and individual borrowers were suffering from higher interest rates due to the contractionary monetary policy. The interest rate jumped to 15/16 percent when the central bank lifted the single cap on interest rates in May 2024. Bangladesh Bank formally instructed banks to set a maximum 9 percent interest rate on all loan products (except credit cards) with effect from April 1, 2020.

Bangladesh Bank (BB) is going to announce a new monetary policy on Sunday in line with the advice of the International Monetary Fund (IMF). Bangladesh requested the IMF for a loan of $4.5 billion last July, and the global lending agency agreed to give it to Bangladesh subject to conditions. Before lending, the IMF gave several conditions for reforming Bangladesh’s financial sector including setting a monetary policy for every quarter of a fiscal year. In line with the IMF conditions, the central bank has decided to announce a monetary policy twice in a year, which was announced for a single time during a fiscal year under former Bangladesh Bank Governor Fazle Kabir. The BB announced the new monetary policy for the remaining period of the current fiscal year, which will be very challenging as inflation and liquidity crisis are mounting, experts say. Former BB Governor Dr Atiur Rahman told UNB that the economic situation is changing frequently due to variables and volatile geopolitical situations and financial conditions involving Russia-Ukraine war. Read: Target trade-based capital flight, not genuine consumption through imports: Economists The central bank’s decision to return to the announcement of the monetary policy twice a fiscal year is a good initiative, he said. However, it should be kept under close watch to readjust the policy instruments as the market conditions are so unstable, he said. Dr Atiur said curbing demand for goods and services and increasing supply lines are necessary tools for controlling inflation. This is a challenging job given the fast changing external and domestic financial conditions, he said. The central bank should remain cautious about the multiplier effects of creating more reserve money as the private credit growth and public borrowing level have already reached their targeted limits, he said. Indeed, containing inflation should remain the top objective of the upcoming monetary policy as the low and middle income groups of people are in troubled water due to this, said Dr Atiur, who also teaches at the Dhaka University. Former IMF official and economist Dr Ahsan H. Mansur told UNB that the monetary policy cannot bring any impact as the interest rate cap is fixed at maximum 9 percent. Policy interest rate rising will bring a little change in the economy while lending interest rate is a big tool of monetary policy to control money supply and reducing consumption’s demand. With the fixed interest rate, the monetary policy cannot make any change in the economy, he said. Read: Bangladesh Bank raises dollar exchange rate by Tk 1 to Tk 100 Mansur said that the central bank is bringing high power money (HPM) in the market, which will have multiple impacts, and the exchange rate of domestic currency (taka) will also fall then. [High powered money or powerful money refers to that currency that has been issued by the central bank] While the exchange rate will fall, inflation would go up and liabilities of external payment would definitely increase, he said. The new monetary policy will be announced as per the IMF's wishes. As a part of lending, a team of IMF held a series of meetings in Dhaka from October 26 to November 9. The IMF team led by Rahul Anand (Bangladesh’s mission chief) met with the Bangladesh Bank, the Ministry of Finance, the Energy Division, BBS, the planning ministry, BSEC, NBR, and BERC to know the latest economic situation. As part of this, the IMF DMD Antoinette Monsio Sayeh is arriving in Dhaka to review the update and finalize the loan deal with Bangladesh. The BB is announcing monetary policy during her Dhaka visit starting on January 14. A team led by Bangladesh Bank Governor Abdur Rauf Talukder met with the IMF on the side-lines of the World Bank-IMF annual meeting in Washington last October. After the meeting, the governor told reporters that Bangladesh will get the loan from the IMF.

Bangladesh Bank (BB) will announce monetary policy for the new fiscal year (2022-23) on June 30 amid challenges of growing inflation rate and taka weakening against US dollar. BB’s outgoing governor Fazle Kabir will announce the monetary policy physically through a press conference though it was announced virtually or just uploaded on the central bank website in the last two years due to the Covid-19 pandemic. Read:More Bangladeshis are becoming rich despite pandemic and inflation: BB Usually the BB formulates and publishes monetary policy for controlling inflation and achieving the desired GDP growth. Monetary policy is very important in the financial management of the country. Through this, a plan is presented to increase or decrease the internal debt, money supply, internal resources, and foreign resources. The BB has been facing several challenges this year to prepare a monetary policy as the time is very challenging for price hike of energy and essential commodities as well, said a senior official who works at the monetary policy department of BB. Chief Economist of BB Md. Habibur Rahman told UNB that the government has set interest rates on bank loans and the exchange rate of dollars. “There is nothing new in this year's monetary policy, but controlling the inflation rate will be given priority,” he said. Experts said the government borrowing from banks and other domestic sources to make up the budget deficit will create a pressure on bank deposit and in the monetary policy should include measures to increase investment and employment.