Bangladesh Economic Update, August 2014
The current issue of the Bangladesh Economic Update focuses on the recently announced half-yearly Monetary Policy Statement (MPS) for the period of July-December of FY 2014-15, by the central Bank, Bangladesh Bank (BB). The Update examines the current MPS in the background of three major economic issues – debt-financing-instrument-based (bank borrowing) deficit financing leading to higher inflation, presence of huge idle money in the banking system not coming into system as investment and the implications of both in affecting the national income. A review of the last five MPSs including the recent one announced by BB indicates that the targets set in the MPSs have been falling short, implying the lack of effectiveness and crisis of credibility in both formulating and implementing the MPSs. With a view to restraining the inflationary pressure and ensuring sufficient credit growth to stimulate inclusive economic growth, the central bank has recently pursued a monetary policy that keeps high policy rate along with higher cash reserve ratio (CRR).