The central Bank’s monetary policies in the second half of the FY07 will continue to aim it supporting annual real GDP of 7.0 per cent, while keeping inflationary pressures under control. This was disclosed in the Monetary Policy released by the Bangladesh Governor Dr. Salehuddin Ahmed. The Bank projected that the full fiscal year growth would be in the range of 6.5-6.8 per cent while inflation would be between 6.85 and 6.95 per cent in January-June period. The projected growth rate range is between 6.5 and 6.8 per cent but the central bank has taken policies to support a seven per cent growth provided that conducive political environment prevails.

The objectives of the policy statement are to support the government to achieve and sustain higher growth, maintain price stability and adjust smoothly to internal and external shocks. Bangladesh Bank will continue its cautious monetary policies, which it has been pursuing since mid-2005. But monetary policy alone is not enough to achieve the targeted growth, if it is not backed by prudent revenue and trade policies. The central bank comes up with the half-yearly policy statement, making projections on economic indicators and outlining the steps it would take up during next six months to support the growth and contain the inflation.

The Bangladesh Bank expressed its deep concern over ‘unusual’ level of bank borrowing by the government. The government, according to the policy statement of the BB, borrowed Tk. 63.50 billion from the banking system during the first half of the current fiscal as against the budgetary estimate of Tk. 54.34 billion for the entire fiscal. The government’s unusual bank borrowing was attributed to the shortfall in receipts-both revenue and net foreign financing-during the July-December period of the current fiscal.

The central bank advised the government to beef up revenue and foreign fund mobilsation and limit its expenditures during the second half of the fiscal to help contain the bank borrowing within the budgetary limit. It felt that completion of the sale of the Rupali bank to the highest foreign bidder could help the cash-strapped government substantially.

The BB, however, hinted that the interest rates would not be increased further despite the cautious monetary policy being pursued by the central bank.