The document analyzes monetary policy in Bangladesh over several fiscal years, noting economic challenges and the policy approaches taken. Restricted monetary policy was initially used from 2013 to focus on corporate governance and stability, employing tools like open market operations and interest rates. Expansionary policy was later used to increase growth, utilizing reverse repo operations and cash reserve requirements. The analysis discusses targets, actuals, impacts like inflation and growth rates, and shifts between restrictive and expansionary stances based on economic conditions.

2. ANALYSIS
OF
MONETARY POLICY IN BANGLADESH

4. QUESTIONS THAT ARISE FIRST
How can we understand which monetary policy is used?
How the various tools are used to imply that policy?
How can we understand the impacts?

5. Steps In To Analyzing Monetary Policy

6. 2ND HALF OF FY-2013
Economic Challenges :
Robust foreign remittance
Export growth along with sluggish import growth
Frequent strikes
Introduction of new foreign currency borrowing facilities

7. POLICY APPROACH: RESTRICTED MONETARY POLICY
Aimed at:
Focusing on improving corporate governance
Preserving the country’s external sector stability
Policy Instruments:
Open market operation
Repo rate & reverse repo rate

8. H2 FY-2013
Targeted Actual Actual-prev.
Broad money growth 17.2% 16.7% 17.7%
Repo Rate 7.25% 7.25% 7.25%
Reverse Repo 5.25% 5.25% 5.25%
GDP growth 6.1-6.4% 6.03% 6.01%
Inflation 6.0-6.5% 7.53% 8.05%
Domestic credit growth 19.3% 17.8% 12.3%
Private sector growth 15.5% 13.8% 18.5%
Public sector growth 33.7% 23.4% 11.7%
Cont…..

9. OTHER RELATED IMPACTS:
Double digit remittance
Exchange rate appreciation by 2.6%
Marginal loss in export competitiveness

10. 1ST HALF OF FY-2014
Economic Challenges:
Sluggish aggregate demand
Reduction in devolvement of all government
securities
Difficulties in repaying loans
Countrywide shut-downs.
Domestic disruptions on businesses

11. POLICY APPROACH: EXPANSIONARY MONETARY POLICY
Aimed at:
Emphasizing on using automation and capacity building
Policy Instruments:
Repo and reserve repo
Open market operations etc

12. H1 FY-2014
Targeted Actual Actual-prev.
Broad money growth 17% 15.2% 16.7%
Repo Rate 7.25 7.25% 7.25%
Reverse Repo 5.25 5.25% 5.25%
GDP growth 5.8-6.1% 6.1% 6.03%
Inflation 7% 7.60% 7.53%
Domestic credit growth 19.3% 17.80% 17%
Private sector growth 16.5% 15.7% 13.8%
Public sector growth 22.90% 19.9% 23%
Cont…..

13. OTHER RELATED IMPACTS
Crude oil prices rose about 5% in H1FY14
Sluggish services and construction sector data
Negative growth in remittances (- 8.4%)
Aggregate demand and overall economic growth is lower

14. 2ND HALF OF FY-2014
Economic Challenges :
Maintenance of reserve money growth
Space for private sector credit growth
Obstacle in promoting exports
Problems in strengthening credit and debt markets

15. POLICY APPROACH: EXPANSIONARY MONETARY POLICY
Aimed at:
Increasing the economic growth
Policy Instruments:
1. Reverse repo operations
2. Cash Reserve Requirement (CRR)

16. H2 FY-2014
Target Actual Actual-prev.
Broad money growth 16.0% 16.00% 15.2%
Repo Rate 10.25% 10.25% 7.25%
Reverse Repo 5.20% 5.20% 5.25%
GDP growth 6.1% 6.10% 6.1%
Inflation 7.50% 6.50% 7.60%
Domestic credit growth 17.80% 13.80% 17.80%
Private sector growth 16.5% 14.00% 15.7%
Public sector growth 11.4% 12.90% 22.90%
Cont…..

17. OTHER RELATED IMPACTS:
Temporarily suspend Treasury Bill auctions
Government fails to create the investment demand

18. 1ST HALF OF FY-2015
Economic Challenges :
Increased reserve money supply
Reduced the growth of private sector
Increased public sector credit
Increased domestic credit growth target

19. POLICY APPROACH: EXPANSIONARY MONETARY POLICY
Aimed at:
Increasing the economic growth
Control inflation
Policy Instruments:
1. Liquidity support for banks
2. Policy interest Rates
3. Reserve money growth

20. H1 FY-2015
Target Actual Actual-prev.
Broad money growth 16-16.5% 16.50% 16.00%
Repo Rate 7.2% 7.25% 10.25%
Reverse Repo 5.20% 5.25% 5.20%
GDP growth 6.5- 6.8% 6.51% 6.10%
Inflation 6.5% 6.40% 6.50%
Domestic credit growth 17.4% 17.40% 13.80%
Private sector growth 15.5% 15.50% 14.00%
Public sector growth 12.7% 25.30% 12.90%
Cont…..

21. OTHER RELATED IMPACTS:
Increasing inflation of non-food item.
Government borrowing decrease from banking
system

22. POLICY APPROACH: RESTRICTED MONETARY POLICY
Aimed at:
Preserving the country’s external sector stability
Policy Instruments:
1. Liquidity support
2. Interest Rate
2nd half of FY-2015

23. H2 FY-2015
Targeted Actual Actual-prev.
Broad money growth 14.20% 13.80% 16.50%
Repo Rate 7.25% 7.25% 7.25%
Reverse Repo 5.25% 5.25% 5.25%
GDP growth 6.51% 6.50% 6.51%
Inflation 6.20% 6.19% 6.40%
Domestic credit growth 16.50% 10.90% 17.40%
Private sector growth 13.80% 13.70% 15.50%
Public sector growth -1.70% -4.20% 25.30%
Cont…..

24. OTHER RELATED IMPACTS:
Inflation, especially for food items is decline
Increase export revenue

25. POLICY APPROACH: EXPANSIONARY MONETARY POLICY
Aimed at:
Emphasize on using automation and capacity building
Policy Instruments:
1. Bank rate
2. Repo and reserve repo
3.Open market operations etc
1st half of FY-2016

26. H1 FY-2016
Targeted Actual Actual-prev.
Broad money growth 15% 13.2% 13.80%
Repo Rate 6.75 6.75% 7.25%
Reverse Repo 4.75 4.75% 5.25%
GDP growth 7.00% 7.05% 6.50%
Inflation 6.07% 5.92% 6.19%
Domestic credit growth 15.50% 13.20% 10.90%
Private sector growth 14.80% 16.7% 13.70%
Public sector growth 18.70% 17.00 -4.20%
Cont…..

27. OTHER RELATED IMPACTS:
Private sector trade credit from abroad
Created a low-inflation environment

28. IMPACTS: AT A GLANCE

29. HAVE ANY QUESTIONS ???