WE are worried with the latest data from the Bangladesh Bank regarding the country’s economic growth.
It revealed that the growth in credit flow to the private sector had plummeted by 66 basis points to 9.20 per cent in September, a stark contrast to the 9.86 per cent recorded a month ago.
This decline is a serious setback to the country’s steadily growing economy, which relies heavily on the private sector as its motive engine.
The report upheld multifaceted reasons behind this decline trend.
The persisting energy crisis in the industrial belts, the central bank’s aggressive measures to contain inflation and the uncertainty surrounding the resumption of business activities after the mass uprising that toppled the Sheikh Hasina regime in August has all contributed to the drastic fall in credit appetite among businesspeople.
The entrepreneurs have postponed their business-expansion plans, as reflected in the recent trends of credit flow.
However, the ongoing trend of private-sector growth may continue in the coming months, with the continuation of the existing contractionary monetary-policy stance to contain inflationary pressure on the economy.
This is a short-term solution that may not address the underlying issues. The country’s industrial production has been severely affected by the persisting energy crisis and ongoing unrest in the industrial belts.
The complete resumption of business activities after latest mass uprising is still uncertain.
The frequent rise in the cost of funds will certainly put businesses in jeopardy, and the continuous shrinking of industries will be the spillover effect of such gradual policy-rate hike.
The local investment climate was not in favour of business during the July-August period, and apart from political stability, uninterrupted supply of utilities needs to be ensured for improving the country’s overall investment climate.
We must say the country’s economic growth is heavily reliant on the private sector, and any decline in credit flow will have far-reaching consequences.
The government must take immediate action to address these issues and create a conducive business environment.
This includes ensuring a stable energy supply and resolving the outstanding issues with the garment sector, and providing a clear roadmap for the resumption of business activities.
The government must also work towards creating a stable and predictable policy environment that encourages investment and growth.