By all accounts, the Bangladesh Bank (BB) in its monetary policy statement (MPS) for the second half of the current fiscal has expressed its concern over the losses, incurred by the country's economy, during the politically volatile period. While announcing the MPS on Monday last, BB Governor, Dr Atiur Rahman was explicity sensitive to the business and investment losses suffered by the country during this period. There is no denying of the reasons for this.
The monetary policy is purported to charting out the possible course of the economy for the rest of the months of the current fiscal year (FY), 2013-14. The BB governor has preferred to term it investment-friendly as well as cautious in nature. If the policy translates into reality, one could not expect more. It has been categorical to point out that big business houses and conglomerates would have done better if they collected funds from the country's capital market, leaving ample opportunities for smaller borrowers to take advantage of bank credits.
Alive to the problems being faced by the businesses in making repayments of loans, the central bank has already gone for certain measures including relaxation of its earlier loan rescheduling policy. The bottom line is to maintain the impetus to productivity and economic growth. To that end, the ceiling for private sector credit has been fixed at 16.5 per cent. The BB is hopeful that the output growth will pick up in the second half of the FY. But the question still remains unanswered about whether monetary policy alone, without having convergence with fiscal policy measures and other supportive actions in areas of economic -- or, politico-economic management to be more exact -- can help promote investment and accelerate the pace of economic growth.
It has to be admitted that monetary policies, however much sound they may be, are not enough to make economic miracle happen; nor are they an alternative to long-term infrastructure development and investment in productive ventures and enterprises. Diversion of capital and credit -- and also, what many quarters have feared about flight of capital through overinvoicing of imports -- as well as other devious means, have remained a headache for banks. This could be possible because political leaderships have always soft-pedalled on the key issue of improving governance and curbing corruption. The banks have now been asked to strictly scrutinise the credit-worthiness of borrowers. It is indeed vital to make an authentic assessment of the credibility of the fund's use for productive purposes. Political interference has stood in the way of doing the job properly.
There lies between the policy framing and implementation a grey area which is deliberately used by the ministry of finance. The more that area is reduced, the less interference by the ministry. Macroeconomic stability is good so long as the trickle-down benefits do not hurt the lower segments of the population too much. Investment, no matter if it is in factories and industries or in infrastructure development, is a prerequisite for employment generation and production. So policy frameworks will get their inherent purposes served only if one becomes complementary to the other. Fiscal policies, moreover, need continuity irrespective of change in governments. It is because of this there is a need for political consensus on matters of economic policy in a country.
Despite many odds, the country has done well enough on its economic front but if a graft-free governance structure could be put in place, its achievements could be startlingly impressive. Meanwhile, the central bank, on its own, will now have to be particularly cautious, more in deeds than in actions, about containing price pressures while facilitating the banks to deploy their surplus or excess liquidity cost-effectively. Here, the level of forex reserve, now at a very comfortable level, merits a careful attention in respect of its uses so that its potential inflationary impact is neutralised and also related funds are used in a prudent manner for the larger interests of the national economy.
