Vol. 5 Num 1141 Tue. August 14, 2007  

BB chief links proper post-flood rehabilitation to 7pc GDP growth

The central bank governor, Salehuddin Ahmed, yesterday said it is possible to achieve the estimated GDP growth if post-flood rehabilitation programmes are implemented properly.

The Bangladesh Bank (BB) governor, however, said it will be difficult to contain the rising inflation rate unless the country increases agricultural production.

Salehuddin was talking to reporters after a meeting with non-banking financial institutions (NBFI) at the central bank office.

A recent report of the World Bank apprehended that GDP growth of Bangladesh for the current fiscal year may come down to 6.8 percent due to the flood when the estimated growth is 7 percent.

The BB governor said an investment-friendly environment is prevailing in the country and credit flow of the banks has increased in recent days.

"Liquidity has been reduced by around Tk 1,000 crore, which is now about Tk 9,000 crore," he said.

He said the biggest challenge is to stimulate production so that the huge amount of farm loan, if disbursed as per target, does not have adverse impact on the money supply.

Salehuddin said the central bank is encouraging the commercial and specialised banks to achieve farm loan disbursement target to stimulate crop output.

The banks have so far made a target to disburse agriculture credit of Tk 7,700 crore, of which Tk 1,100 crore will be distributed by the private banks.

Salehuddin said the central bank will request the nationalised, specialised and private commercial banks to open their own monitoring cells to ensure bank-wise supervision and proper disbursement of the agriculture credit.

At the same time, the central bank is encouraging imports of food item, which he expects will have a positive impact on the money supply. He also stressed the need for encouraging investment to mitigate the pressure on the money supply.

Replying to a question, the central bank governor said the BB has nothing to do with the decision by Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB) to raise interest rates on agriculture loans from around 8 percent to 12 percent.

He however said the central bank will request the banks the interest rate on agriculture credit should not be more than that of the industrial loan.