Bangladesh Bank Monetary Policy Statement FY 2020-21

Bangladesh Bank has announced an expansionary policy stance for the FY 2020/21, to meet the need for additional funding required to restore the country’s economy affected by Covid-19. We present two papers analyzing the policy statement.

Highlights

BRAC EPL Research: Expansionary Monetary Policy to Tackle the Onslaught of Covid-19

The monetary policy tools available for crisis situations are dwindling for central banks around the world. Cutting interest rate to near zero level (some even in negative territory) and QE (bond buying program) are losing their impact gradually.

Bangladesh Bank has come out with all guns blazing. The 2020-21 MPS is expansionary and growth accommodative. Key interest rates have been slashed by a good amount. The central bank is fully aware of the fallout due to the pandemic, severe flood, lingering slowdown of the local economy, rising bad assets in the banking sector and sluggish global economy. More than BDT 1 trillion (about USD 12 billion) stimulus package has already been announced by the Government to aid the faltering economy. BB is trying to ensure availability of adequate liquidity at low cost for propping up the business climate.

Are these policy changes enough to regenerate employment and revive the economy? This would only work in this crisis when people and businesses are confident of a win against the coronavirus. Banks are supporting all types of businesses with interest deferral, moratorium and low-cost financing. No major change has been advised for banks in managing their credit risk and piling bad debt. However, this is unprecedented situation and making credit available at low cost is the best bet for any central bank in the world. BB has done the same thing; we only wait for a better control of the pandemic by our government. 

EBLSL Research: Monetary Policy Statement FY’21 Highlights

An expansionary, growth accommodative policy stance for the FY’21 in consideration of impediments caused by ongoing COVID-19 pandemic, seasonal floods, and international sluggish economic and volatile price situations.

Bangladesh bank endures an expansionary, growth accommodative policy stance for the FY’21 in response to the additional fund requirements for restoring country economy. Recent MPS focuses on:

• Accommodating credit to available sectors while recovering economy from the adversity caused by COVID19 pandemic and rehabilitation of the production capacity to restore growth.
• Keeping CPI inflation contained within the targeted ceiling of 5.04 to 5.93%.