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Private sector credit growth 18.49 percent in February

The private sector has to play a big role to help Bangladesh in achieving the Sustainable Development Goals (SDGs). In this regard, private investment to gross domestic product needs to be scaled up to 40 percent or $400 billion by 2030.

Mirsarai Economic Zone (MEZ)-Textile Today
Figure1: Mirsarai Economic Zone (MEZ) will be the industrial capital of Bangladesh and play a pivotal role in fulfilling the country’s investment.

The new monetary policy is failing to contain the private sector credit growth with the rate rising to 18.49 percent in February although the bank owners have already bagged a number of facilities pleading liquidity crisis.

In January, private sector credit growth stood at 18.36 percent, up from 18.13 percent the previous month and way past the ceiling of 16.8 percent set for the latter half of fiscal 2017-18.


              Figure 2: Private sector credit growth in last nine month (in %). Source: Bangladesh Bank

AB Mirza Azizul Islam, Former Finance Adviser of Caretaker Government said, “Private sector credit growth in last few months indicated that there was no problem in the supply side and no liquidity crisis either.” “Banks would not be able to give such amount of credit if there was any liquidity crisis,” he added.

Read more: The Structural and policy gaps for the private sector are barriers to reach the high middle-income country

The average private sector credit growth fell to 15.66 percent in the fiscal year 2016-2017 from 16.78 a year ago as the banks were grappling with excess liquidity.

“Private sector needs predictable and business-friendly policies,” said Md Shafiul Islam Mohiuddin, President of the Federation of Bangladesh Chambers of Commerce and Industry. “Business policy reforms will be brought about in consultation with the private sector and related stakeholders,” he added.

Banks private sector credit growth was 18.13 percent in December 2017 after witnessing 19.06 percent growth in the November of the year mainly due to banks’ lending frenzy.

According to Bangladesh Bank data, the domestic credit increased to Tk 9,55,852.9  crore including Tk 8,62,224.8 crore in the private sector. Besides, credit in the public sector, however, fell by 14.24 percent in February this year from 11.70 percent negative growth in the previous month.

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