Monetary policy faces challenge on declining pvt sector credit growth: UO

Unnayan Onneshan, an independent multidisciplinary think-tank, has said that the declining growth in private sector credit resulting stagnant private investment and consequential unemployment are likely to challenge the efficacy of monetary policy strategies.

The UO in its January issue of Bangladesh Economic Update released on Saturday also said that the targeted private sector credit growth at 16.5 per cent might prove ineffective in boosting private investment and achieving the target of the GDP growth in the year without increasing the quality of credit.

In the Economic Update, the organisation conducted a rapid assessment on recently-announced monetary policy statement for January–June of the fiscal year 2016-2017. 

The think-tank feared that the target of private sector credit growth might remain unachieved causing further stagnation in private investment as the growth in the sector has been declining over the last few years.

It also pointed out that the increasing public investment had not succeeded to create much needed crowding in for private investment in the country. 

The UO said that number of unemployed population in the country increased at an annual rate of 5.29 per cent during the period of 2000–2010 and increased to 2.60 million in 2010 from 1.70 million in 2000. 

On the other hand, 10.6 million people in the country have no job security, it said. 

In addition, 9.1 per cent of the country’s youth labour force is currently unemployed, the think-tank pointed out.

The organisation also reiterated its concern about inefficiency in the banking sector as the ratio of gross non-performing loan to the total outstanding loans is increasing. 

Allocation of Tk 2,000 crore as investment for recapitalisation in the budget for the last year also implies inefficient use of public money, it said.
The UO urged the gov.

source: Newage