Focus Writing: Evaluation Of Monetary Policy (2020 – 21)
Fazle Kabir, the estimable governor of the Bangladesh Bank
“The prime objectives of the monetary policy stance and monetary programs for FY21 are the economic recovery from the adversity of the Covid-19 pandemic and rehabilitation of the production capacity of the economy “
Taking into account the horrendous global pandemic – Coronavirus (unseen jeopardy took myriads of people’s precious lives), and its punitive economic outcomes, Bangladesh Bank, (the central bank of the emerging economic country namely Bangladesh), has unveiled an ‘expansionary and accommodative’ monetary policy statement (MPS) projecting domestic credit growth ceiling at 19.3 percent in the fiscal year 2020-21 (FY21) to accommodate 14.80 percent credit growth in the private sector and 44.4 percent in the public sector.
The Central Bank’s Monetary Policy Statement (MPS)
” The bank rate which remained unchanged for the last 17 years [since 2003] has also been considered to be reduced from five percent to four percent to rationalize it with the current interest rate regime,”
The monetary policy aims at pumping cheaper money into the economy for the post-pandemic recovery. As part of that objective, the central bank went for a 50 basis-point cut in its overnight repo rate to make cheaper money available to the banks for lending. At the same time, it has cut the reverse repo rate by 75 basis points so that it can also take money from banks at a lower rate and thereby influence the market in a downward direction.
Monetary Policy – A Locus Focus
” Monetary policy should remain data-dependent, be well- communicated and ensure that inflation expectations remain anchored ”
~ Gita Gopinath, The Chief Economist of the International Monetary Fund.~
☞ BB monetary policy and policy stance remain expansionary for FY21 with all growth support without hampering inflation target of 5.4%
☞ BB proposes to cut in overnight Repo rate from 5.25 percent to 4.75 percent to make funds available to banks at a cheap price
☞ Reverse Repo rate cut from 4.75 percent to 4 percent
☞ Bank Rate unchanged for 17 years reduced from 5 percent to 4 percent
☞ Monetary policy faces risk factors in terms of COVID-19, price volatility, global economic downturns, floods, and cyclones. Projected output growth is found to be on target if Covid situation improves and the global and domestic economy recovers
☞ Expects stocks to rebound in view of supportive monetary policy
☞ Public sector credit to expand by 44.4 percent and private credit by 14.8 percent
Hazards Of The Monetary Policy
” The recently taken policies of the central bank would increase money flow, but cautious utilization of money would be vital. Otherwise, people may invest their money in non-productive sectors.”
~ Dr. Salehuddin Ahmed, the former governor of the Bangladesh Bank ~
☞ The uncertain length and depth of the Covid-19 pandemic in the coming days is considered to be the number one risk factor in attaining the monetary program objectives of FY21.
☞ Further aggravation of the global recessionary economic condition due to the lingering novel coronavirus pandemic, along with the volatilities in oil price and ongoing geopolitical tensions in the Middle-East, might have a serious negative impact on future export earnings and wage earners’ remittance inflows to Bangladesh.
☞ Bangladesh Bank’s expansionary and accommodative monetary policy stance along with the implementation of the various stimulus packages in the economy may intensify the unexpected inflationary pressure through creating price bubbles in the near future.
☞ The present non-performing loan (NPL) situation in the banking industry of Bangladesh may soon disappear due to worsening business conditions.
☞ Natural calamities – such as floods and cyclones – always remain a potential risk factor because of the country’s nature-dependent agricultural sector.
To sum up, A departure from conventional monetary policy is a need of the hour. The Bangladesh Bank (BB) deserves high marks for coming remarkably close to meeting this need by announcing the continuation of an expansionary monetary policy stance since the immediate aftermath of the Covid-19 shock to the Bangladesh economy.
The articulation of the policy objectives is commendably noteworthy. We expect that a galaxy of policy measures, taken by the central bank, would help generate employment opportunities in the agriculture, industry, and services sectors so that pandemic-related economic losses are rapidly recovered.
Take a look at this essay’s important portion of word meaning.
1. Taking into account the horrendous global pandemic = খতরনাক বৈশ্বিক মহামারি বিবেচনা করে।
2. Expansionary and accommodative’ monetary policy statement = সম্প্রসারক এবং উপকারক আর্থিক নীতি বিবরণী।
3. Pumping cheaper money into the economy = অর্থনীতিতে সুলভ অর্থের প্রবহণ।
4. Price volatility = অর্থের অনিশ্চয়তা।
5. Further aggravation of the global recessionary economic condition due to the lingering novel coronavirus pandemic = প্রলম্বিত মহামারি নোভেল করোনাভাইরাসের কারণে বৈশ্বিক অর্থনৈতিক মন্দাবস্থার পুনঃপ্রকোপ।
Evaluation Of Monetary Policy (2020 – 21) ছাড়াও আরও পড়ুনঃ
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