Contractionary stance for longer period will hamper private sector growth: DCCI

The Dhaka Chamber of Commerce & Industry (DCCI) has expressed concern over Bangladesh Bank’s decision to maintain a contractionary monetary policy in H2 FY2024-25, keeping the policy rate at 10 per cent.

While aimed at curbing inflation, this rigid stance hampers private sector credit growth and economic expansion, the trade body said in a statement on Monday.

The private sector relies heavily on banks for investment, and high interest rate raise production cost, fueling inflation, it said. 

Despite inflation easing to 9.94 per cent in January 2025 from 10.89 per cent in December 2024, it remains above the desired level, the chamber said in the statement. 

Moreover, DCCI has also expressed concern about the decision to maintain the private sector credit growth target at 9.8 per cent for January-June FY25, while actual growth fell to 7.3 per cent in the first half of 2025, the lowest in 12 years.

Meanwhile, public sector credit growth surged from the 14.2 per cent target to 18.1 per cent in December 2024, requiring curbs through austerity measures.

To restore private sector confidence and business operations, credit growth must reach double digits, it noted.

The leading chamber urged Bangladesh Bank to introduce sector-specific funds and entrepreneurial support programs to boost credit flow, as restrictive monetary policies risk further economic stagnation.

Though the central bank implemented the market-based exchange rate, yet the traders (export and import) had to buy US dollar at higher price with different rates.

This discrepancy must be addressed to ensure consistency, benefiting all stakeholders, including traders and emitters, the DCCI said.

The trade body criticized Bangladesh Bank for not taking sufficient steps to strengthen banking governance amid the liquidity crisis and rising NPLs.

While the adoption of the ECL methodology under IFRS 9 from 2027 is a positive move, there is a limited focus on implementing governance.

Without stronger governance and faster legal resolutions, the banking sector will remain vulnerable, hindering private sector growth and economic resilience, it said. 

The chamber urged Bangladesh Bank to adopt a more flexible and balanced monetary policy, closely monitor its impact on inflation and growth, and implement targeted measures to boost private sector credit flow.

By fostering a conducive environment for investment and ensuring macroeconomic stability, Bangladesh can achieve its economic growth and stability in the days to come, it added.