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its monetary policy until inflation comes under control.

This signals that the lending rate is likely to move up further in the upcoming months as the inflation rate has stayed above 9 percent since March last year and shows no sign of slowing down.

In a negative development, credit growth to the private sector rose in December from the previous month.

Fund disbursement rose 10.13 percent in December, up from 9.90 percent a month earlier, according to the BB. Industry insiders, however, describe the rise as insignificant because the growth has hovered around 10 percent for the last few months.

The growing lending rate, the falling trend of imports due to central bank curbs aimed at saving the foreign currency reserves, and the contractionary monetary policy have been behind the slow credit growth.

The BB has lowered the private sector credit growth target to 10 percent from 11 percent for the January to June period of FY24.

Mohammad Ali, managing director of Pubali Bank, thinks the growth will not accelerate in the coming days due to the high-interest rate, which was capped at 9 percent between April 2020 and June 2023.

“There are even risks that unemployment may go up.”

A central banker says the banking regulator has cut the private sector credit growth target as its current focus centres around combatting inflation.

“The slower credit growth and the higher lending rate are not a matter of concern for us now. Rather, the elevated level of inflation and the foreign exchange crisis currently matter the most.”

The spike in the interest rate, however, will help savers as the returns on their deposits are going up since banks are offering better rates to attract funds amid the persisting liquidity crunch.