Monowar Hossain
The monetary policy stance announced by the central bank for the first- half of the current fiscal is in fact, an expansionary one, although the central bank termed it a 'growth accommodative monetary policy'.
It has been stated in the policy that the bank would constantly monitor the inflationary pressure in the first-half of the year and would act as and when necessary to keep inflation under control.
Governor of the Bangladesh bank Dr Atiur Rahman announced the monetary policy last Monday which has been designed to extend support to government's policies and programmes aiming at placing the economy on firmer foot on the path to faster growth and poverty reduction maintaining monetary and price stability.
He said the policy approach would be reviewed continuously and appropriate adjustment in the policy would be made as and when necessary in the light of actual development. The governor also said that the policy would go a long way in discouraging the luxury- expenditures and investment in unproductive sectors. He also called for an active role of the civil society to achieve the goal of the policy. He said the policy would smoothen availability of bank loans for all productive sectors including the sub-sectors of the agriculture. It can be said without any hesitation that rendering support to the huge development activities and non-development programmes undertaken by the government for the current fiscal means releasing more money, and naturally control on the growth of money circulation now in operation would be relaxed to a good extent. The logical conclusion one might draw that inflation would rise in the event.
In the immediate past fiscal, growth in the agriculture sector was less compared to that in the previous year. The same was true of growth in the industrial sector. But there was slight improvement in the growth in the service sector last year. For the current fiscal growth in the GDP has been projected at 6.7 per cent. In order to attain that level of growth, increasing production in the agriculture sector, expanding market for exports, improving the infrastructure and ensuring adequate and dependable supply of gas and electricity are essential. In fact, the success of current year's budget largely depends on the factors stated above. And, needless to say, expenditure has to increase to attain the growth level as projected.
It is clear that expenditure would increase in the current fiscal and it is generally believed that more expenditure means increasing the risks of inflation. Whether inflation would remain contained in that situation ( 6.5 per cent inflation) is a big question. The inflation that occurred last year was higher than the forecast made for the period, said a paper of the central bank.