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BB vows to contain inflation

Central bank expects economy to grow at upwards of 6.5pc

Star Business Report
Bangladesh Bank will take steps to keep inflation at the targeted 6.5 percent level for the current fiscal year in the upcoming monetary policy, it said yesterday.
The new pay-scale for government servants, the possibility of an oil price hike and the impact of output growth on the price level will be looked at to devise a plan to contain inflation ata tolerable level.
The central bank expects the economy to grow at upwards of 6.5 percent in fiscal 2014-15. If the stimulation in domestic demand that the economy experienced in the latter part of 2014 prolongs, achieving a growth rate of 6.5 percent or more will not be difficult in 2015, BB said in the statement.
The government has targeted a 7.2 percent GDP growth for the fiscal year.
BB will also move to improve investor confidence in the comingyear, it said.
“We will help boost investment confidence by improving banking governance," it said, while citing the moderate level of net default loans in recent times for improved supervision.
In the middle of 2014, there was a one-time jump in default loans due to a host of reasons including new best practices for classification and provisioning as well as political instability, it said.
However, the central bank will not be lenient in this regard in the coming days.
Banks must embrace the culture of disbursing quality loans, it said, adding that BB may extend some facilities to credible borrowers in trouble but it will never hesitate to take stem measures against bad borrowers. The economic developments of 2014 conveyed mixed signals.
"The way the external sector is performing convinces us that macro stability in 2015 will be improved to a greater extent," BB said.
It grew at a respectable 6.12 percent this year against all political odds, and inflation has been on slow but steady descent, which helped expedite consumption and investment decisions.
Inflation came down to 6.21 percent in November, the lowest in 24 months.
Excess liquidity of dollars and taka in the local market began to evaporate, suggesting a revival of trade and commerce.
The last period of 2014 marked a new momentum in consumer and business confidence. Imports and exports reflected an upward trend, and so did remittances and foreign currency reserves, which registered a new record.
Foreign reserves stand at $22.32 billion at present, which is enough to cover seven
months' imports.
Per capita income rose from $1,044 dollars in fiscal 2012-13 to $1,190 in fiscal 2013-14.
The inflow and outflow of foreign currencies at the bank level are more frequent nowadays than before, suggesting a vibrant import demand for 2015, the BB said.
Imports in fiscal 2013-14 rose to $37 billion, which is expected to grow at around 12percent in fiscal 2014-15.
Exports waited until the very last months of the year to show that trend, it said.
Remittances, which amounted to $14.2 billion in fiscal 2013-14, are likely to grow at 10 percent in fiscal 2014-15.
The political turbulence that spanned throughout 2013 took a heavy toll on the economy. It created some degree of uncertainty for investment.
As a result, investment stagnancy was a highly discoursed topic throughout 2014.
Nevertheless, investment began to accelerate around the end of 2014.