Pvt sector credit growth slows amid liquidity shortage

[Imran Khan]

Pvt sector credit growth slows amid liquidity shortage​

Mostafizur Rahman | Published: 23:00, Nov 29,2022

A file photo shows an employee counting bundles of taka notes at a bank in the capital Dhaka. — New Age photo

The private sector credit growth dropped slightly to 13.91 per cent in October amid a liquidity shortage and a fall in imports.
According to Bangladesh Bank data, the private sector credit growth reached 13.91 per cent in the fourth month of the current financial year 2022-23, decreasing from 13.93 per cent in September.
The total domestic loans to the private sector stood at Tk 13.89 lakh crore at the end of October, up Tk 13.79 lakh crore on a month earlier.
The government’s borrowing soared by 32.11 per cent in October compared with that in the same month in the past year.
It stood at Tk 3.05 lakh crore at the end of October.
The overall domestic credit flow widened by 16.93 per cent in October after a 16.42-per cent growth in September.
The growth reached 14.07 per cent in August, hitting nearly the BB monetary policy target of 14.1 per cent for FY23.
Bankers said that bankers were slow in lending money due to the ongoing liquidity shortage on the financial market.
In addition, imports have declined in recent months due to restrictions and scrutiny by the government and the central bank, they said.
The BB reduced the private sector credit growth target for FY23 to 14.01 from 14.8 per cent of FY22 to control inflationary pressure, but it is still high considering the low interest rates in banks.
Besides, many people may now avoid taking loans considering the economic condition in the country, the bankers said.
The point-to-point inflation in October was at 8.91 per cent.
The Bangladesh Bureau of Statistics recorded the overall inflation over 9 per cent in August and September, the highest since 2010-11 after the food inflation crossed a double-digit mark in the period.
The credit growth rate had been on the decline since February 2019 with the rate plunging to 7.55 per cent in May 2021.
After the withdrawal of Covid-containment strict restrictions for the last time in August 2021, the private sector credit growth started growing in line with the major growth in imports.
High imports created instabilities on commodity and currency markets in the country.
The trade deficit, which occurs when import payments exceed export earnings, hit a record high of $33.24 billion in the past financial year 2021-22.
The trade deficit was $7.54 billion in the July-September period of the current financial year 2022-23 compared with that of $6.77 billion in the same period in the past financial year, creating further pressure on foreign exchange reserves.
The foreign currency reserves in Bangladesh dropped to $34.05 billion on November 29 from $48.6 billion in August 2021.
The exchange rate rose sharply to Tk 108 from Tk 84.8 against the US dollar within a year. The BB approved floating rate of dollars on September 14.
From July to November 29, the BB sold $5.9 billion to banks to address dollar shortage in the financial sector which on the other hand mopped up equivalent amount of local currency from the banking system.
The central bank sold $7.62 billion directly to the banks in FY22 amid a shortage of the greenback on the market.

Pvt sector credit growth slows amid liquidity shortage

The private sector credit growth dropped slightly to 13.91 per cent in October amid a liquidity shortage and a fall in imports. According to Bangladesh...

www.newagebd.net

 

[BananaRepublicUK]

Pvt sector credit growth slows amid liquidity shortage​

Mostafizur Rahman | Published: 23:00, Nov 29,2022

A file photo shows an employee counting bundles of taka notes at a bank in the capital Dhaka. — New Age photo

The private sector credit growth dropped slightly to 13.91 per cent in October amid a liquidity shortage and a fall in imports.
According to Bangladesh Bank data, the private sector credit growth reached 13.91 per cent in the fourth month of the current financial year 2022-23, decreasing from 13.93 per cent in September.
The total domestic loans to the private sector stood at Tk 13.89 lakh crore at the end of October, up Tk 13.79 lakh crore on a month earlier.
The government’s borrowing soared by 32.11 per cent in October compared with that in the same month in the past year.
It stood at Tk 3.05 lakh crore at the end of October.
The overall domestic credit flow widened by 16.93 per cent in October after a 16.42-per cent growth in September.
The growth reached 14.07 per cent in August, hitting nearly the BB monetary policy target of 14.1 per cent for FY23.
Bankers said that bankers were slow in lending money due to the ongoing liquidity shortage on the financial market.
In addition, imports have declined in recent months due to restrictions and scrutiny by the government and the central bank, they said.
The BB reduced the private sector credit growth target for FY23 to 14.01 from 14.8 per cent of FY22 to control inflationary pressure, but it is still high considering the low interest rates in banks.
Besides, many people may now avoid taking loans considering the economic condition in the country, the bankers said.
The point-to-point inflation in October was at 8.91 per cent.
The Bangladesh Bureau of Statistics recorded the overall inflation over 9 per cent in August and September, the highest since 2010-11 after the food inflation crossed a double-digit mark in the period.
The credit growth rate had been on the decline since February 2019 with the rate plunging to 7.55 per cent in May 2021.
After the withdrawal of Covid-containment strict restrictions for the last time in August 2021, the private sector credit growth started growing in line with the major growth in imports.
High imports created instabilities on commodity and currency markets in the country.
The trade deficit, which occurs when import payments exceed export earnings, hit a record high of $33.24 billion in the past financial year 2021-22.
The trade deficit was $7.54 billion in the July-September period of the current financial year 2022-23 compared with that of $6.77 billion in the same period in the past financial year, creating further pressure on foreign exchange reserves.
The foreign currency reserves in Bangladesh dropped to $34.05 billion on November 29 from $48.6 billion in August 2021.
The exchange rate rose sharply to Tk 108 from Tk 84.8 against the US dollar within a year. The BB approved floating rate of dollars on September 14.
From July to November 29, the BB sold $5.9 billion to banks to address dollar shortage in the financial sector which on the other hand mopped up equivalent amount of local currency from the banking system.
The central bank sold $7.62 billion directly to the banks in FY22 amid a shortage of the greenback on the market.

Pvt sector credit growth slows amid liquidity shortage

The private sector credit growth dropped slightly to 13.91 per cent in October amid a liquidity shortage and a fall in imports. According to Bangladesh...

www.newagebd.net

Growing by 14%

In the U.K. we call it soaring credit growth. Which would push Bank of England to hike interest rates.

But to a second rate reporter it’s a sign of crisis

 

[Destranator]

Growing by 14%

In the U.K. we call it soaring credit growth. Which would push Bank of England to hike interest rates.

But to a second rate reporter it’s a sign of crisis

Apples and oranges comparision there. Unlike Bangladesh, the UK is an economically developed nation with limited room for improving productivity.
UK credit growth would therefore be much slower due to less available opportunity for starting new ventures or expanding existing ones in a commercially viable manner.

 

[BananaRepublicUK]

Apples and oranges comparision there. Unlike Bangladesh, the UK is an economically developed nation with limited room for improving productivity.
UK credit growth would therefore be much slower due to less available opportunity for starting new ventures or expanding existing ones in a commercially viable manner.

All countries have capacity constraints. No country can grow at such a pace without fuelling inflation.

U.K. being a service based economy, and open to immigration, means it’s actually easier to expand than a manufacturing country like BD.

In BD capacity constraint exists in factory floor space, machinery, warehousing, cold storage, power, roads, rail, transport - which take years to expand.

Reliance on imported gas/oil - given dwindling foreign reserve - is the ultimate capacity constraint.