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Private sector credit growth tumbled further in May amid a resurgence of Covid cases across the country and the subsequent imposition of fresh restrictions on movement.
Data from the Bangladesh Bank showed that growth in the private sector credit plunged to 7.55 per cent in May, the lowest after the coronavirus outbreak.
The poor state of investment implies that the country’s investment situation has come to stagnation, former adviser to an interim government economist AB Mirza Azizul Islam told New Age on Thursday.
He also questioned how the other indicators were performing well, as claimed by different authorities, at a time when the investment situation had deteriorated significantly.
For a long time, private sector investments have not reached such low levels, he added.
Mirza Aziz also did not think that the investment situation would improve unless the coronavirus situation improved.
‘It would not be practical to think of an economic turnaround before the coronavirus crisis comes under control,’ he said.
Asked about whether the government should come up with more assistance programmes, the economist said that support should be provided so that employees and workers did not suffer starvation amid the Covid crisis.
In April, the country’s private sector credit growth rate was 8.29 per cent.
The BB data also showed that the banks’ outstanding credit to the private sector reached Tk 11,71,808.90 crore at the end of May from Tk 10,89,557.60 crore in the same month of 2020.
Disbursement in May was 7.55 percentage points lower than the BB’s monetary projection of attaining 14.8 per cent growth in the current fiscal year 2020-2021.
In January, the growth rate was 8.32 per cent.
Economists and bankers predicted that the BB would miss its monetary policy projection for FY21 as the country entered a fresh Covid restriction phase on April 5.
The restrictions were reinforced on July 1 amid a sharp increase in infections, thus discouraging businesses from making fresh investments.
In the fiscal year 2020-2021, the highest private sector credit growth was 9.48 per cent in September 2020.
BB officials said that the credit growth rate until September 2020 was above 9 per cent but dropped below 9 per cent afterwards when the businesses’ appetite for stimulus funds waned.
To get rid of the huge amount of excess liquidity, the banks are now focusing on the consumer segment since the recovery rate of consumer loans is higher than that of industrial loans, bankers said.
Some of the banks are offering loans to the retail segment even at 8 per cent interest rate, they said.
