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RCL Monetary Policy Statement(MPS) Analysis January to June FY’2023
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RCL Monetary Policy Statement(MPS) Analysis January to June FY’2023

Key Takeaways:

  • 6.50% Real GDP growth target for H2FY23 as against the existing 7.50% for H1FY23
  • 7.50% Inflation target as against the existing 5.60% for H1FY23
  • The repo rate is 6% from 5.75%, and the reverse repo rate is 4.25% from 4%
  • Public sector credit is fixed to grow by 37.7%
  • Consumer credit loan cap 12% & No cap for credit cards
  • Complete removal of the deposit floor rate
  • Private Sector Credit Growth is set at 14.1%
  • The reserve money is set to grow by 14%

The MPS reflects an accommodative monetary policy while satisfying fiscal support in the face of accelerated inflation and the global economic debacle induced by the Russia-Ukraine War. Raising Repo and Reverse Repo rates is one of the options to combat inflation, particularly from the perspective of open-market operations. The ongoing crowding-out situation pushed BB to pump Tk. Sixty-six thousand crores narrow money in the banking system.

Money supply and Liquidity Growth YOY

Based on BB’s fresh money injections, broad money is projected to increase by 12.1% in June 2023 from 8.4% in Dec 2023. This de-leveraging is expected to solve liquidity shortfall considering the risk of hyperinflation induced by banking sector loan scams, inflationary pressures, and weak governance.

Policy Rates & Call Money Rate
The call money rate increased significantly during H1FY23, which increased to 5.81% at the end of December 2022 from 4.42% at the end of June 2022, mainly due to the contemporary liquidity stress in the country’s banking system.

Bangladesh’s economy has been facing many challenges both from the global and domestic front since 2020, followed by the Covid-19, Russia-Ukraine war, rising inflation & exchange rate volatility. Despite all these challenges, the economy of Bangladesh performs reasonably well due to its’ inherent capacity, large consumer base, and supportive monetary and fiscal policies. The revival of accelerated economic growth depends on: the length and intensity of the Russia-Ukraine war, the interest rates pivot by the Fed (USA), the recovery of the European regional economy, and the re-emergence of the Covid-19 situation. However, Bangladesh’s economy has enough resilience to maintain its current status in any adverse situation.

Download the full report at – RCL Monetary Policy Statement(MPS) Analysis January to June FY’2023

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  • January 19, 2023

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