1. 18 June 2023
Bangladesh Bank

2. 2
• Y
ear 2020 : COVID-19 : Massive
disruptions in livelihood –health
system breakdown and economic
collapse;
• Y
ear 2021 : Recovery from COVID-19;
• Y
ear2022 : Russia-Ukraine Crisis
provoking global economic and
financial sanctions;
• Y
ear 2023 : Looming uncertainties
with possible global economic
recession.
• Outcome and Policy Response - 1
 Very low inflation and output
 QE & near zero interest rate
• Outcome and Policy Response - 2
 Growing inflation and output
 QE & near zero interest rate
• Outcome and Policy Response - 3
 Skyrocketing inflation and
moderate output growth
 QT & aggressive policy rate hikes
• Outcome and Policy Response - 4
 High inflation and ER pressure
 Contractionary policy stances
Global Context of H1FY24 MPS

3. Global Growth Situation
3
Region Act. Act. Proj. Proj.
CY21 CY22 CY23 CY24
World 6.3 3.4 2.8* 3.0*
USA 5.9 2.1 1.6* 1.1*
Euro Area 5.4 3.5 0.8* 1.4*
China 8.4 3.0 5.2* 4.5*
India 9.1 6.8 5.9* 6.3*
FY21 FY22 FY23 FY24
Bangladesh 6.9 7.1 5.50* 6.5*
6.03** 7.5**
(In percent)
Source: IMF. *April 2023 WEO, IMF. **GoB.

4. Global Price Situation
Point-to-Point Inflation (in percent)
Item Jun 20 Jun 21 Jun 22 May 23
Energy -36.4 93.6 84.7 -40.8
Non-energy -3.5 43.8 12.0 -170
Food -2.3 34.3 23.5 -21.3
Rice 13.6 -5.3 2.3 17.0
Source: World Bank and
FAO.
4
111.6
97.0
180
150
120
90
60
30
0
Dec-
19
Jun-20
Dec-
20
Jun-21
Dec-
21
Jun-22
Dec-
22
May-23
Index
Commodity Price Index
(Base: 2010 =100)
Energy Non-energy
Source: World Bank
127.8
124.3
80
100
120
140
160
Dec-
19
Jun-20
Dec-
20
Jun-21
Dec-
21
Jun-22
Dec-
22
May-23
Index
Food Price Index
(Base: 2014-2016=100)
Food Rice
Source: FAO

5. Inflation in Major Economies
5
Region Act. Act. Act Act. Proj. Proj.
CY20 CY21 Jun 22 Apr 23 CY23 CY24
USA 1.2 4.7 9.1 4.9 4.5* 2.3*
Euro Area 0.3 2.6 8.6 6.1# 5.3* 2.9*
UK 0.9 2.6 8.2 8.7 6.8* 3.0*
India 6.2 5.5 7.0 4.7 4.9* 4.4*
FY20 FY21 FY22 May 23 FY23 FY24
Bangladesh 5.65 5.56 6.15 8.84 7.5** 6.0**
Source: IMF. *April 2023 WEO, IMF. **GoB. # May 2023.
(In percent)

6. Policy Rate in Major Economies
6
(In percent)
Region Dec 21 Jun 22 Dec 22 May 23
USA (FFR) 0.00-0.25 1.50-1.75 4.25-4.50 5.00-5.25
Euro Area (FRT) 0 0 2.50 3.75
UK (BR) 0.25 1.25 3.50 4.50
India (repo) 4.00 4.90 6.25 6.50
Bangladesh (repo) 4.75 5.50 5.75 6.00
Source: BIS.

7. Local Context of H1FY24 MPS
7
• High inflationary and exchange rate pressures.
• Substantial erosion of foreign exchange reserves.
• Larger BOP deficits (combine effects of CAB and FAB deficits)
• High non-performing loans.
• Tight liquidity situation.
• Relatively higher interest rates across all areas.

8. Domestic Inflation Scenario
9.96%
9.94%
9.24%
2%
4%
6%
8%
10%
Jun-19
Dec-
19
Jun-20
Dec-
20
Jun-21
Dec-
21
Jun-22
Dec-
22
May-23
Point to Point Inflation
General Food Non-Food
Jun-19
8
Dec-
19
Jun-20
Dec-
20
Jun-21
Dec-
21
Jun-22
Dec-
22
May-23
Average Inflation
10%
9.12%
8.84%
8.60%
8%
6%
General Food Non-Food
4%

9. Liquidity Situation of Banks and
Interest Rate Scenario
Item Jun 20 Jun 21 Jun 22 May 23
Excess cash reserves 23,847 62,498 26,876 9,373
Excess liquid assets 1,39,578 2,31,463 2,03,435 1,63,682
Source: DOS, BB
(Crore Taka)
9
Item Jun 21 Jun 22 Dec 22 June 23
Call money rate 2.23 4.42 5.80 6.03*
Lending rate 7.33 7.09 7.22 7.29@
Deposit rate 4.13 3.97 4.23 4.38@
91-Day TB rate 0.35 5.95 6.90 6.75*
182-Day TB rate 0.68 6.44 7.30 7.07*
Source: BB. @ Apr 2023. * 12 June 2023.

10. External Sector Development
10
(Billion USD)
Indicator FY
Import
5
(-
Export
3
(-1
Remittance 1
(1
CAB -
FAB 7
Overall Balance 3
Net FX Sale -0
FX Reserves 3
BDT/USD
(inter-bank rate)
84
Source: BB. Note: Figures in the parentheses indicate % growth. # as of Apr-23 *Up to 12 June 2023, @ up to 14 June 2023.

11. Recent Policy Initiatives
11
• To control inflation.
• To improve the current account balance.
• To manage exchange rate instability and foreign
exchange reserves.
• To stabilize the financial sector.
• To strengthen the capital market.
Containing demand and making supply side interventions

12. Recent Policy Initiatives (1)
12
• Raising the policy rate (repo rate) by 25
basis point to 6.0 percent on 16 January
2023.
• Quantitative tightening through selling
huge foreign currencies to banks.
• Supporting the productive economic
sector, including agriculture, CMSMEs,
import-substitute and export-oriented
industries through various refinance
schemes/pre-finance schemes.
• Relaxing the disbursement policy of
refinance scheme for CMSME sector.
• Formulating the Agricultural
Development Common Fund
(BBADCF) to increase agricultural output.
• Introducing the Mudarabah liquidity
support (MLS) and Islamic Banks
Liquidity Facility (IBLF) for the Shariah-
based Islamic banks.
• Allowing the borrowing from OBU.
• Establishing the Export Facilitation
Pre-finance Fund (EFPF).
• Introducing the credit guarantee
scheme (CGS) for CMSMEs loans.

13. Recent Policy Initiatives (2)
13
• Discouraging unnecessary and luxury
imports.
• Strengthening the monitoring and
price verification of imports.
• Strengthening the monitoring on
foreign exchange dealings by banks
and money changers.
• Reducing the cash foreign currency
holdings by money changers.
• Taking crackdown measures on illegal
money changers and MFS providers to
mitigate unauthorized and hundi-
related transactions.
• Restricting the all sorts of foreign tours
by officials in banks (including BB) and
NBFIs.
• Enforcing 180 days limit for export
proceeds repatriation by fixing the
exchange rate at 180th day.
• Reducing the export retention quota
and banks’ net openposition.
• Enhancing the interest rate on loans
from export development fund.
• Raising the cash incentive rate (2.5
percent) on inward remittances.

14. Recent Policy Initiatives (3)
14
• Easing the remittance repatriation
and cash incentive distribution process
and drawing arrangements with foreign
exchange houses.
• Allowing the mobile financial
services in remittance collection and
distribution process.
• Waiving the remittance transaction
fees by local banks.
• Liberalizing the NRB’s investment
procedure including opening of FC
account (PP in place of NID).
• Enhancing the interest rate on non-
resident foreign currency deposits.
• Allowing Bangladesh Taka (BDT) to depreciate
consistent with the market force.
• Making the MoU with state-owned and private
commercial banks with a view to reduce NPL
at a certain level and improve the good
governance.
• Taking initiative to amend 5 Acts, related to
financial sector, to address financial sector issues.
• Taking initiative to streamline the appointment of
Directors in NBFIs.
• Ensuring enough liquidity in the capital
market.
• Introduction MI module to develop secondary
market for BGTBs.

15. New Policy Initiatives
15
1. Adopting a new monetary policy framework by shifting from
monetary targeting to interest rate targeting and introducing an
interest rate corridor considering the interbank call money rate as
the operating target of monetary policy.
2. Taking the decision to increase the policy rates, i.e., repo rate
by 50 bps, the reverse repo rate by 25 bps, the special repo
adjusted downward to 8.50 percent.
3. Removing the lending rate cap and replacing it with a
competitive and market-based reference rate along with a margin
4. Moving towards a market-driven unified and single exchange
rate regime to ensure stability in the foreign exchange market,
improve the BoP conditions, and protect FX reserves.

16. New Monetary Policy Framework
16
Instruments
• Policy rate
• Open market
operations
• Reserve
requirement
• Bank rate
Operating target
• Interbank call
money rate as a
counterpart of
short-term
interest rate
Information
variable
• Inflation
forecasts
• GDP forecasts
• Money and
credit situation
• BoP outlook
Primary monetary
policy objective
• Price stability
• Financial
stability
• Economic
growth

17. Interest Rate Corridor
8.50%
6.50%
4.50%
Standing Lending
Facility Rate(Ceiling)
Policy Rate
Standing Deposit
Facility Rate (Floor)
Call Money Rate
17

18. Reference Lending Rate
18
• The reference lending rate will be known as SMART (Six-
month Moving Average Rate of Treasury bill) to be
announced monthly through the BB website.
• SMARTplus a margin of up to 3.00 percent will be
applicable for banks, and SMART plus a margin of up to 5.00
percent will be applicable for NBFIs.
• The lending activities for CMSMEs and consumer loans may
be subject to an additional fee of up to 1.00 percent to cover
supervision costs and there will be no changes in the interest
rates applicable to credit card loans.

19. Exchange Rate Unification and GIR Calculation
19
• BB will adopt a unified and market-driven single exchange
rate regime, allowing the exchange rate between BDT and USD
or any other foreign currency to be determined by market forces.
• Starting from 1 July 2023, BB will no longer sell any forex at a
discounted rate.
• BB will compile and publish gross international reserves (GIR)
in line with the BPM6 while keeping track of the current
practice of calculating and reporting total foreign assets.

20. Outcomes of H2FY23 MPS
20
Indicator Jun 22 Dec 22 May 23 Jun 23 (YoY % change)
Act. Act. Act. Est. Prog.
Broad money 9.4 8.5 9.5 10.5 11.5
Net foreign assets -11.9 -23.3 -26.2 -25.7 -11.9
Net domestic assets 17.2 18.6 20.0 20.4 17.9
Public sector credit
(NCG in crore Taka)
29.1
(62,540)
27.6
(12,452)
43.3
(78,140)
40.0
(1,15,425)
37.7
(1,11,608)
Private sector 13.7 12.8 11.1 11.0 14.1
Reserve money -0.3 17.4 5.3 10.0 14.0
Indicator (in %) FY20 FY21 FY22 FY23
Act. Act. Act. Estimate Target
Average inflation 5.65 5.56 6.15 8.84* 7.50
GDP growth 3.45 6.94 7.10 6.03 6.50

21. Monetary and Credit Projections for FY24
21
(In percent)
Item
Jun-22
Act.
Dec-22
Act.
May-23
Act.
Jun-23
Est.
Dec-23
Proj.
Jun-24
Proj. (Pr. Jun.23)
Broad money 9.4 8.5 9.5 10.5 9.5 10.0 (11.5)
Net Foreign Assets* -13.5 -25.0 -27.8 -26.2 -20.3 4.9 (-11.9)
Net Domestic Assets 19.7 21.8 22.4 22.4 16.8 11.0 (17.9)
Domestic Credit 16.2 15.1 16.7 16.4 16.9 15.3 (18.5)
Credit to the public sector 29.1 27.6 43.3 40.0 43.0 30.0 (37.7)
Credit to the private sector 13.7 12.9 11.1 11.0 10.9 11.0 (14.1)
Reserve money -0.3 17.4 5.3 10.0 0.0 6.0 (14.0)
Money multiplier 4.93 4.63 5.23 4.95 5.07 5.14 (4.82)
Source: Bangladesh Bank. *Calculated using the estimated constant exchange rates of end June 2023.

22. Objective and Stance of H1FY24 MPS
22
• This MPS gives the highest priority in taming inflation by containing the
aggregate demand while making the supply-side intervention by ensuring
required the flow of funds to the productive sector, including agriculture,
CMSMEs, import substitutes and export-oriented industries and services.
• BB will adopt a unified and market-driven single exchange rate regime to
contain exchange rate pressure. With a substantial depreciation of BDT
against USD, the exchange rate is staying around Tk. 108.0/$ - very close to
the prevailing market conditions as supported by REER based exchange rate
and BB’s in-house research, requiring no major depreciation at this moment.
• Given above policy objectives, BB intends to adopt a contractionary
monetary policy stance to bring down the rate of inflation to a desired level,
while remain supportive to the investment and employing generating activities.

23. Near-term Macroeconomic Challenges
23
• Near-term macroeconomic challenges are: containing inflation
and managing exchange rate pressure.
• To tackle these challenges, BB is adopting a tight monetary policy
stance. The ultimate success of this policy stance, however,
depends on a few critical factors:
 Effectiveness of the new policy initiatives.
 Maintaining the exchange rate stability alongside a surplus financial account.
 A pause in the policy rate hike race among the central banks of major
economies including the US FED, ECB, etc.
• Given the favorable developments of these factors, BB aims to
tackle inflation and exchange rate pressures while fostering a stable
and resilient macroeconomic environment.

24. Thank You All