• Sunday, Nov 27, 2022
  • Last Update : 09:54 am

Economists unsatisfied with sluggish private sector credit growth

  • Published at 01:53 pm September 29th, 2021
Bangladesh Bank BB head office HQ
Mehedi Hasan/Dhaka Tribune

Increased for  three months in a row but still behind target

Private sector credit growth increased in June, the final month of the last fiscal year, and in the opening months of FY22, July and August.

But this performance by the country's banking sector lags behind fiscal year targets by a large margin.

And the country's leading economists are not impressed.

According to the Bangladesh Bank’s (BB) recent data, private sector credit rose to 8.42% in August from 8.38% in July.

It was 8.35% in June. This means in August it improved by 0.04%, but this figure is still 6.38% lower than BB’s target.

Earlier this year, in April it was 8.29% which fell to 7.55% the following month.

The data shows that at the end of August 2021, the status of loans disbursed by banks in this sector stood at Tk11,94,391 crore.

On the other hand, during the same period last year, the balance of loans disbursed to the private sector was Tk11,01,675 crore.

From last year, the growth in the amount is now Tk92,715 crore.

According to Zahid Hossain, former lead economist of the World Bank, the increase in private sector credit growth is not satisfactory.

In an interview with the Dhaka Tribune on Wednesday, he said: “The whole world was overcoming the pandemic. The business sector has begun to regain its growth and the country's exports have increased again. The same has come up with the growth of private sector debt.”

“But I don't see anything to be too happy about this 8.42%,” he added.

"We are still far below the 15-16% growth seen in the sector before. Moreover, this figure is not even close to the target of 14.80% growth of private loans set by Bangladesh Bank in the current financial year,” he explained.

Speaking to the Dhaka Tribune, AB Mirza Azizul Islam, economist and financial adviser to the former caretaker government said: “Since Covid-19 was detected in March last year, most of the loans have gone to the capital sector under government incentives. But now many people show interest in doing business with fresh or new loans. So, the pace of business sector has begun to return.”

“But private sector debt disbursement is progressing at a very slow pace. I think there is nothing to be satisfied with right now,” he added.

About the target setting, Sirajul Islam, executive director and spokesperson of Bangladesh Bank, told Dhaka Tribune: “The target is always more than what needs to be achieved. However, it is not possible to reach the previous condition overnight. The pandemic’s influence has diminished but it’s not over yet.”

“The speed of debt flow will gradually increase. I believe it is possible to hit a double-figure this financial year,” he added.

The central bank in its monetary policy for this fiscal year had set its private sector credit flow target at 14.8% which is unchanged from the previous fiscal year's target.

However, the target could not be met last year either.

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