The BB monetary policy statement, which was released yesterday, said following 6.7 percent real GDP growth of FY06, economic activities in FY07 have remained strong, supported by robust export and domestic demand, despite recent disruptions due to pre-election political unrests.

However, the statement warns, "...the political unrests, if prolonged, will significantly disrupt output, distribution and export activities; creating shortages and new inflationary pressures."

Governor Dr Salehuddin Ahmed released the monetary policy statement of the central bank at its headquarters at a press conference. "Congenial and conducive political environment is necessary to continue such economic growth," Dr Salehuddin said.

Referring to the strong economic growth, BB Deputy Governor Allah Malik Kazemi gave much of the credits to the working class people of the country, adding, the country's internal economic condition has reached a stable position and for this, despite the recent political crisis, the economy shows healthy growth.

The monetary policy statement predicts that the monetary policy of the second half of the FY07 will continue to aim at supporting annual real GDP growth of seven per cent, while keeping inflationary pressures under control.

It said monetary policies aimed at supporting real annual GDP growth of seven per cent will continue unchanged in the cautious and restrained stance in the second half of the FY07 keeping in view the prevailing external situation and the internal risks to price stability posed by the domestic situation.

But, the policy stance will of course be adapted promptly and flexibly in the face of any unfolding development, with special attention to the credit needs of sectors promoting and supporting economic growth.

About borrowing from the banking sector, the policy statement said the government's receipts of net foreign financing fell far short of estimates while revenue receipts also lagged budgetary estimates substantially.

"The shortfalls in receipts vis-à-vis expenditure have caused bank borrowing of the government to swell unusually in the first half of the FY07. The estimated Tk 63.50 billion net new borrowing has exceeded the budgetary estimate of Tk 54.34 billion by a large margin," the statement said.

The monetary policy statement suggested the government to reduce the bank borrowing levels sharply as well as mobilise additional revenues and increase of foreign aid. It also asked the government to limit its expenditure.

It said completion of sale of Rupali Bank to the foreign buyer could substantially help ease the current pressure on government finances.