The central bank of Bangladesh has set policies aimed at tackling challenges affecting the economy.
The Bangladesh Bank (BB) said on Wednesday that the main objective of its strategic directives in the half-yearly monetary policy, spanning from January to June 2024, is centered on upholding a vigilant, hawkish approach to monetary policy until inflation rates are effectively reined into a desired level.
Despite the ongoing challenges, the BB said in its new monetary policy statement that Bangladesh's economic outlook for the next few months remains positive, with the economy forecast to reach 6.5 percent and moderated inflation at 7.5 percent.
The BB has revised down the economic growth projection for 2023-24 fiscal year to 6.5 percent from the initial 7.5 percent considering the ongoing challenges in the economy.
Also, it revised the projection for inflation upwards to 7.5 percent from 6 percent as consumer prices persistently stayed high.
Meanwhile, the BB said it was evaluating the potential of implementing a crawling peg exchange rate system.
This system would serve as a transitional arrangement, paving the way toward a fully flexible exchange rate regime in the future, it said, adding that a significant focus is being placed on enhancing the management of non-performing loans.
The bank said it has decided to increase its policy rate by 25 basis points to 8 percent from 7.75 percent to deal with the demand-side pressures while ensuring the required flow of funds to the priority and production sectors to promote supply-side activities.
This was the ninth straight rate hike in the past 20 months as consumer prices have remained at an elevated level.
Bangladesh's inflation was at 9.93 percent last October, above the central bank's then-target of 6 percent for the current fiscal year from July 2023 to June 2024.
The central bank also lowered the target for private sector credit growth to 10 percent from 11 percent.
The new monetary policy also seeks to stabilize and uphold the internal and external value of the Taka while concurrently fostering investment, employment opportunities, and overall economic growth.
The BB said it finds itself at a critical juncture as the economy navigates through the latter half of the fiscal year, facing a multifaceted economic landscape.