Monetary policy lacks steps to boost private investment: SANEM


Star Business Report
The central bank’s monetary policy has failed to accelerate private investment, the South Asian Network on Economic Modelling (SANEM) said in its latest quarterly review on the Bangladesh economy.

“The monetary policy by Bangladesh Bank has been, in general, able to maintain a so-called stable ‘status quo’ but failed to generate a big push to accelerate private investment, which is much warranted at this moment,” said Selim Raihan, executive director of SANEM. He presented a keynote paper on SANEM’s quarterly review in Dhaka on Wednesday.

SANEM is a non-profit research network of economists and policymakers in South Asia with a special emphasis on economic modelling.

Raihan said the share of public and private investments in GDP shows that though the share of private investment in GDP has remained static, the share of public investment in GDP has risen.

The share of private investment in total investment fell whereas it was the opposite for public investment, he added.

To achieve 8 percent GDP growth by 2020; the required investment-GDP ratio would have to be 35.8 percent, he said.

Raihan said recent banking scams and escalation of non-performing loans show major institutional weakness of the financial sector.

Mere lowering of the interest rate is not enough for private sector credit expansion; there are numerous other challenges that need to be addressed under the broader reform agenda mentioned above, he added.

He identified five issues for further growth acceleration in Bangladesh — accelerating private investment, diversification of the economy, rise in efficiency, mobilising political capital and promoting inclusive growth.