The private sector credit growth dropped to 13.96 percent year-on-year in February, on the back of declining imports and political unrest.
In February last year, the figure stood at 19.55 percent, according to data from Bangladesh Bank.
Economists and bankers alike blame the recent political turmoil for the decline, as businessmen shy away from making new investments amid a fall in industrial production and trade.
“The trucks have been failing to transport goods and ports cannot function properly,” Atiur Rahman, BB governor, told The Daily Star.
“We are looking for alternatives so that the businessmen can make up for the losses and continue with their trading activities.”
The private sector credit growth in the first eight months of the fiscal year, too, was lower than in the same period of fiscal 2011-12.
In the July-February period, private sector credit augmented 6.31 percent, a drop from the 11.68 percent growth experienced during the first eight months of last fiscal year.
The latest batch of private sector credit data comes as a blow to the central bank’s attempts to maintain the growth momentum and contain inflation to tolerable levels for the rest of the fiscal year.
As means to achieve that, the central bank in January set the target of 18.5 percent for private sector credit growth.
The declining imports and the recent bank scams are to blame together with the precarious political scenario, for the slow growth in private sector credit, said Zahid Hussain, World Bank’s lead economist.
Imports fell around 7 percent year-on-year between July and February, when in the same period last fiscal year, it increased by nearly 14 percent, according to BB.
“A big portion of the country’s trade financing goes to import. As imports have fallen, so too have credit,” he said.
“Secondly, the various scams the banks have encountered in recent times have made them very conservative in their lending activities,” Hussain added.
However, Helal Ahmed Chowdhury, managing director of Pubali Bank, said banks have gone easy on the businessmen following BB’s directive earlier in the year.
Source: The Daily Star
