Businesses have expressed displeasure with Bangladesh Bank setting a private sector credit growth target of 14.1% for 2022-2023, which is lower than in the fiscal year just ended.
The reduction will be detrimental to the inflow of investment in the private sector, for which the flow of money in the economy will be lower and jobs will not be created at the expected level.
As a result, the coveted improvement in the private investment-to-GDP ratio will not occur. The ratio has hovered around 23% over the past decade, the companies said.
The private sector credit growth target was set at 14.8% for the year ending yesterday. It stood at 12.94% in May.
However, companies welcomed the move to curb the import of luxury items as it would certainly help improve the central bank‘s foreign exchange reserves.
They felt that the dollars saved here would help bring in more commodities, which was very important in these difficult times.
Mostofa Azad Chowdhury Babu, senior vice president of the Federation of Bangladesh Chambers of Commerce and Industry, said the central bank should have set the policy on how to attract more private sector investment.
But, unfortunately, it was reduced, he said.
“So the expected influx of private sector investment will not create jobs.”
Md Saiful Islam, president of the Metropolitan Chamber of Commerce and Industry, said the government should exert all kinds of efforts to keep exports growing.
Export growth is to be 50% in FY 2022-23. But it should also be borne in mind that the country was able to achieve 35% growth in the 2021-22 financial year, which is insufficient to overcome the turbulent times the economy is currently going through, a- he declared.
“If private investment does not take place, employment will also not be generated at the expected level.”
In a mid-June consultation in Dhaka, Islam suggested that the private sector credit growth target be set at a much higher level of 15 percent.
“The proposed monetary policy will reduce the rate at which investments are currently flowing into the private sector, as the government has not encouraged businessmen,” said Faruque Hassan, president of the Garment Manufacturers and Exporters Association. from Bangladesh.
Hassan, however, agreed with the central bank governor’s forecast that export earnings may not rise as much in the new fiscal year due to rising global inflation and the Russian-Russian war. Ukrainian in progress.
The decline in private sector credit flow will also squeeze local industrial investment and employment, said Rizwan Rahman, chairman of the Dhaka Chamber of Commerce and Industry.
“It will also be difficult to reach the private sector investment to national budget GDP ratio of 24.5%, which will have negative effects on the economy.”
“We believe that the definition of luxury goods should be realistically defined for the benefit of business, industry and banks.”
Mir Nasir Hossain, former chairman of FBCCI, said that as companies struggle, the lowering of the credit growth target is discouraging.
He admitted, however, that credit growth remains well below target every year.
Hossain argues that if the increase in investment flows matches the improvement in the business environment, the country could face a liquidity crisis.
“Thus, higher credit growth for the private sector is expected from the central bank.”