by Naim-Ul-Karim
DHAKA, June 30 (Xinhua) -- The central bank of Bangladesh on Thursday rolled out its monetary policy for the first half of the next fiscal year starting July 1, and set policies aimed at bolstering the government's efforts to tackle inflation and foster economic growth.
The Bangladesh Bank (BB) said the main objective of the half yearly monetary policy, spanning from July to December 2022, is to "pursue a cautious policy stance with a tightening bias to contain inflation and exchange rate pressures while supporting the economic recovery process."
The measure also intends to ensure the necessary flow of funds to production and job creating activities for a long-term economic growth, it added.
According to the bank's monetary policy statement, the bank will continue to support the government in implementing its ongoing stimulus packages alongside the central bank's refinance schemes to address new challenges.
The bank has decided to increase its policy rate (the repo rate) by 50 basis points to 5.50 percent from 5.00 percent to deal with the demand side pressures while ensuring the required flow of funds to the priority and production sectors to promote supply-side activities.
The new monetary policy also seeks to curb imports of luxury goods, fruits, non-cereal foods, canned and processed foods, among others, to reduce exchange rate depreciation pressure, protect foreign exchange reserves, and control inflation.
To this end, the bank said it will introduce a new refinance line of credit for import-substituting products to minimize import dependency and save foreign exchange reserves.
While the Ukraine-Russia conflict had limited adverse impact on Bangladesh, climate change and environment-related vulnerabilities, such as recent floods in the north and northeastern part of the country, could have some headwinds on the country's overall price stability and growth prospect.
Earlier this month the Bangladeshi government unveiled a record nearly 7 trillion-taka (about 76.18 billion U.S. dollars) national budget for the 2022-23 fiscal year starting in July and projected economic growth of 7.5 percent in the annual budget.
Bangladesh is targeting an average inflation rate of 5.6 percent in the next fiscal year.
The south Asian country has made a strong economic recovery from the COVID-19 pandemic, and a World Bank report said Bangladesh's gross domestic product growth is expected to remain strong at 6.7 percent in the next 2022-23 fiscal year.
According to the report, Bangladesh's public debt remains sustainable, and the country was considered to face low risks of external and public debt distress. ■