DHAKA (Reuters) - Bangladesh’s central bank on Monday left its key interest rates unchanged at 6.75 percent citing the need to contain inflation and boost economic growth and it raised the private sector credit growth target to 16.8 percent from 16.3 percent.
The 16.8 percent target for January-June represents a slowdown because credit growth hit 18.1 percent in December, exceeding the central bank’s target for July-December.
Bank Governor Fazle Kabir announced the figures while unveiling the monetary stance for the second half of the 2017-18 financial year that ends in June. The bank left the policy repo rate at 6.75 percent and the reverse repo rate at 4.75 percent.
Bangladesh aims to boost growth to 7.4 percent in the current financial year, up from a record 7.28 percent growth in the previous financial year.
The bank, however, said average inflation would be around 5.7 - 6.0 percent in June 2018, posing a problem for the government, which faces a general election this year.
The annual inflation rate in December eased to 5.83 percent from 5.91 percent the previous month, as prices of non-food items rose at a slower pace.
Inflation in October climbed to a 2-year high of 6.04 percent on the back of surging food prices, mainly on prices of rice, the staple food for Bangladesh’s 160 million people.
“Looking ahead, garments exports are expected to benefit from stronger growth in the main export destinations and greater product and market diversifications, including into non-traditional but larger markets such as India and China,” the monetary policy stance statement said.
The bank expects growth both in garment exports and in remittances from Bangladeshis working overseas, which are the key drivers of the country’s $250 billion economy.
Bangladesh’s exports in the 2016-17 financial year rose nearly 1.7 percent from a year earlier but that was the slowest growth in 15 years, while pivotal garment sales posted only 0.2 percent growth.
The policy stance came as Bangladesh is struggling to cope with an influx of around 688,000 Rohingya refugees who have fled an army crackdown in Myanmar’s Rakhine state since last August.
“Fiscal risks from providing support to the influx of the Rohingya refugees remain minimal for now, given the participation and assistance from the development partners,” the statement added.
In January 2016, the central bank last cut its key interest rate by half a percentage point, for the first time in nearly three years, as easing inflation gave it room to help boost economic growth.
Editing by Matthew Mpoke Bigg