Disparity of MPS and economic achievement

Independent regulator can also monitor and forecast the trend of money market and advise market institutions on banking issues

The central bank of a country sketches and projects the glimpse of economic agenda, growth target of government through Monetary Policy Statement. MPS entails a number of economic indicators which determine the monetary management and economic acceleration. In the economic context of Bangladesh, monetary policy is inevitable to make all concerned stakeholders and people aware of the monetary plans and their use in order to mobilise the economic growth featured by all growth determinants. MPS is perceived helping many economic targets to achieve and give the roadmap to implement economic vision. The ultimate and evident objective of the monetary policy is to target the GDP growth and inflation control through monetary management techniques and tools. Developed countries like Britain and USA exercise the objective MPS approach to create some visible economic impacts.
Conventionally, Bangladesh Bank discloses biannual Monetary policy outlining some projections on private and public sector lending target, inflation, growth and Investment target backed by Monetary management plan of actions.  
At the juncture of MPS 2016 M2 and MPS1 for FY2016-17, a number of crucial aspects of the monetary policy as well as inconsistencies with fiscal policies, national Budget and perspective plan of Government and recent economic achievement indicators caught attention elicited below: The achievement of Central Bank in MPS claims the highest private borrowing over last 3 years and record breaking public borrowing. If the private borrowing had risen due to rationalization of repo and reverse repo points, the FY2015-16 would have reflected higher private Investment to GDP ratio whereas the Government investment and GDP has increased slightly. The FY 2015-16 reported 21.78 percent private investment 6.5 percent private investment.
Spread rate has been brought down to 5 percent revising the Repo and reverse Repo points in order to rationalizing the cost of capital and borrowing but is not commensurate the new start up and SMEs Investment and other businesses though established businesses get access to borrowing likewise earlier.
On the other hand, due to higher cost of local capital sourcing, the off-shore financing also encouraged many large investors hitting meanwhile $2.5 Billion in last fiscal year.
Bangladesh Bank looks substantially complacent keeping the food inflation average 5.8 percent though BB keeps blind eye to non-food inflation which exceeds already 6.8 percent. If the factors of non-food inflation remains unmanageable sooner this may push food inflation back to abnormality. It is worth pointing that most of the developed countries try to limit the inflation within 2 percent. Great Britain and many other EU countries suffered from series of double deep recession but hardly let the inflation go beyond 2 percent.
There are many exogenous factors in the economy like primary energy, liquid energy, cost of transport network, weak supply chain network, lack of institutional governance above all absence of enabling business and investment environment caused by weak ease of doing business and economic freedom
condition which may spur noon-food inflation and provoke food
inflation too.
Capital market is always crucial to the capital flow for any economy. Ironically, our capital market has been under-performing over half of the decade with lowest credential and stagnation which also fueled the disparity of cost of capital from institutional borrowing and capital market led financing. Capital market, despite being an essential of monetary policy, has not got enough attention to motivate institutional and individual capital market investors nor any stimulus programme even though no foreign company enlisted over last six years in capital market. And, foreign currency denominated bond market has remained unpopular irrespective to NRBs and foreign investors which also need to be stimulated.  
The provisional GDP growth of 7.05 percent for the FY2015-16 didn’t get endorsed by the IMF and WB nor commensurate the relevant fact and figures like rate of actual local and overseas employment trend, manufacturing, agricultural sector contribution and GDP growth, size of GDP and insignificant rate of ADP
implementation. We conventionally keep emphasizing growth rise but ignored inclusive growth of economy having lower GINI co-efficient and other mass oriented economic benefit.
The budget of FY 2016-17 sets ambitious expenditure and revue target of BDT 5.5 trillion but the legacy of the monetary policy doesn’t leave much provision to realize the fiscal targets due to impoverished synchronization of policy, process and institutions across the board. Lack of fiscal and monetary policy and other perspective plan coordination also creates wide-ranging disorder among the key institutions and economic operational management which end up with frustrating the fiscal and monetary objectives and longstanding economic visions.
In order to making the MPS more result-oriented and tuned with mass and economic welfare,
• Limiting inflation to 2 percent and allowing monetary policy committee meet either monthly or quarterly to closely oversight the inflation, growth trend and fix any problem happens during MPS as most of the countries follow monthly inflation and growth review approach.
• Forming Independent Financial oversight(watchdog) body/regulator to monitor, forecast the banking Industry has been inevitable with no conflict of interest position of Bangladesh Bank.
• Independent regulator can also monitor and forecast the trend of money market and advise market institutions on banking issues including Credit and NPL when required.
• Quantitative easing and forward tool measures followed by Bank of England can be replicate for effective and rewarding monetary policy outcome.
Of contemporary unavoidable factors, the Brexit is expected to worst hit implications like geo-economic order, multilateral trade, business and investment condition between EU and Bangladesh alongside UK over the coming years. Meanwhile, the key economies having tie with UK reassess their current and future economic condition and relation to overcome their likely consequences. In this circumstance, Bangladesh should have eyed on the post Brexit trend and adopt focused monetary measures like interest rate review, low cost export credit to safeguard the exchange rate and Real exchange rate volatility to rid off post Brexit crises and rear multiplier international trade benefits.  
 Our economy is in the juncture towards visionary trajectory of economic graduation in 2021 and beyond led by double digit growth, enormous industrial and investment backed inclusive socio-economic growth coinciding the sustainable prosperity of people of all spheres. Economy has meanwhile marked some precedents of excellence and exemplary economic leadership among the LDCs in MDG, growth trajectory stunning the world due to consistent economic performance over last couple of years and to continue. To materialize the long cherished dream of equitable socio-economic development underpinned by export led industrialisation and SDGs sooner our policy leaders, economists and core institutions are required to be unanimous to redesign upcoming monetary and fiscal policies to orchestrate and prioritise and reframing opportune plan of actions for the widespread economic betterment up and down the country.

The writer is a research Fellow, R&D, DCCI

Disparity of MPS and economic achievement

Independent regulator can also monitor and forecast the trend of money market and advise market institutions on banking issues

The central bank of a country sketches and projects the glimpse of economic agenda, growth target of government through Monetary Policy Statement. MPS entails a number of economic indicators which determine the monetary management and economic acceleration. In the economic context of Bangladesh, monetary policy is inevitable to make all concerned stakeholders and people aware of the monetary plans and their use in order to mobilise the economic growth featured by all growth determinants. MPS is perceived helping many economic targets to achieve and give the roadmap to implement economic vision. The ultimate and evident objective of the monetary policy is to target the GDP growth and inflation control through monetary management techniques and tools. Developed countries like Britain and USA exercise the objective MPS approach to create some visible economic impacts. Conventionally, Bangladesh Bank discloses biannual Monetary policy outlining some projections on private and public sector lending target, inflation, growth and Investment target backed by Monetary management plan of actions. At the juncture of MPS 2016 M2 and MPS1 for FY2016-17, a number of crucial aspects of the monetary policy as well as inconsistencies with fiscal policies, national Budget and perspective plan of Government and recent economic achievement indicators caught attention elicited below: The achievement of Central Bank in MPS claims the highest private borrowing over last 3 years and record breaking public borrowing. If the private borrowing had risen due to rationalization of repo and reverse repo points, the FY2015-16 would have reflected higher private Investment to GDP ratio whereas the Government investment and GDP has increased slightly. The FY 2015-16 reported 21.78 percent private investment 6.5 percent private investment. Spread rate has been brought down to 5 percent revising the Repo and reverse Repo points in order to rationalizing the cost of capital and borrowing but is not commensurate the new start up and SMEs Investment and other businesses though established businesses get access to borrowing likewise earlier. On the other hand, due to higher cost of local capital sourcing, the off-shore financing also encouraged many large investors hitting meanwhile $2.5 Billion in last fiscal year. Bangladesh Bank looks substantially complacent keeping the food inflation average 5.8 percent though BB keeps blind eye to non-food inflation which exceeds already 6.8 percent. If the factors of non-food inflation remains unmanageable sooner this may push food inflation back to abnormality. It is worth pointing that most of the developed countries try to limit the inflation within 2 percent. Great Britain and many other EU countries suffered from series of double deep recession but hardly let the inflation go beyond 2 percent. There are many exogenous factors in the economy like primary energy, liquid energy, cost of transport network, weak supply chain network, lack of institutional governance above all absence of enabling business and investment environment caused by weak ease of doing business and economic freedom condition which may spur noon-food inflation and provoke food inflation too. Capital market is always crucial to the capital flow for any economy. Ironically, our capital market has been under-performing over half of the decade with lowest credential and stagnation which also fueled the disparity of cost of capital from institutional borrowing and capital market led financing. Capital market, despite being an essential of monetary policy, has not got enough attention to motivate institutional and individual capital market investors nor any stimulus programme even though no foreign company enlisted over last six years in capital market. And, foreign currency denominated bond market has remained unpopular irrespective to NRBs and foreign investors which also need to be stimulated. The provisional GDP growth of 7.05 percent for the FY2015-16 didnt get endorsed by the IMF and WB nor commensurate the relevant fact and figures like rate of actual local and overseas employment trend, manufacturing, agricultural sector contribution and GDP growth, size of GDP and insignificant rate of ADP implementation. We conventionally keep emphasizing growth rise but ignored inclusive growth of economy having lower GINI co-efficient and other mass oriented economic benefit. The budget of FY 2016-17 sets ambitious expenditure and revue target of BDT 5.5 trillion but the legacy of the monetary policy doesnt leave much provision to realize the fiscal targets due to impoverished synchronization of policy, process and institutions across the board. Lack of fiscal and monetary policy and other perspective plan coordination also creates wide-ranging disorder among the key institutions and economic operational management which end up with frustrating the fiscal and monetary objectives and longstanding economic visions. In order to making the MPS more result-oriented and tuned with mass and economic welfare, Limiting inflation to 2 percent and allowing monetary policy committee meet either monthly or quarterly to closely oversight the inflation, growth trend and fix any problem happens during MPS as most of the countries follow monthly inflation and growth review approach. Forming Independent Financial oversight(watchdog) body/regulator to monitor, forecast the banking Industry has been inevitable with no conflict of interest position of Bangladesh Bank. Independent regulator can also monitor and forecast the trend of money market and advise market institutions on banking issues including Credit and NPL when required. Quantitative easing and forward tool measures followed by Bank of England can be replicate for effective and rewarding monetary policy outcome. Of contemporary unavoidable factors, the Brexit is expected to worst hit implications like geo-economic order, multilateral trade, business and investment condition between EU and Bangladesh alongside UK over the coming years. Meanwhile, the key economies having tie with UK reassess their current and future economic condition and relation to overcome their likely consequences. In this circumstance, Bangladesh should have eyed on the post Brexit trend and adopt focused monetary measures like interest rate review, low cost export credit to safeguard the exchange rate and Real exchange rate volatility to rid off post Brexit crises and rear multiplier international trade benefits. Our economy is in the juncture towards visionary trajectory of economic graduation in 2021 and beyond led by double digit growth, enormous industrial and investment backed inclusive socio-economic growth coinciding the sustainable prosperity of people of all spheres. Economy has meanwhile marked some precedents of excellence and exemplary economic leadership among the LDCs in MDG, growth trajectory stunning the world due to consistent economic performance over last couple of years and to continue. To materialize the long cherished dream of equitable socio-economic development underpinned by export led industrialisation and SDGs sooner our policy leaders, economists and core institutions are required to be unanimous to redesign upcoming monetary and fiscal policies to orchestrate and prioritise and reframing opportune plan of actions for the widespread economic betterment up and down the country. The writer is a research Fellow, RD, DCCI