Bangladesh lowers borrowing costs as pandemic hits economy

  • News Desk,
    Published: 2020-07-29 15:44:22 BdST

Bangladesh Bank has reduced the repurchase rate by 50 basis points to 4.75 percent, lowering borrowing costs for a third time this year to boost money flow into the pandemic-hit economy.

Bangladesh Bank also reduced the reverse repo rate by 75 basis points to 4 percent, according to the monetary policy statement for fiscal 2020-21, published on the central bank’s website on Wednesday.

“There are several risk factors to the attainment of FY21 monetary policy programme objectives mainly arising from the ongoing COVID-19 pandemic, seasonal floods, and international sluggish economic and volatile price situations,” Bangladesh Bank said.

The central bank has taken up the expansionary monetary policy to boost fund supply at a time when the coronavirus has left a huge impact on the economy.

The prime objectives of the monetary policy stance for FY21 are to revive the economy from ravages of the pandemic and rehabilitate the production capacity, including the restoration of the normal livelihoods while maintaining dual goals of price stability and quality growth, it said.

The monetary policy for the FY21 has been set on the basis the government targets of 8.2 percent real GDP growth and 5.4 percent average general CPI inflation ceiling declared in the national budget.

The central bank has already taken several policy measures to help generate employment opportunities in agriculture, industry and services sectors in order to quickly recover the economic losses inflicted by the COVID-19 pandemic.

These include reducing the cash reserve ratio for banking institutions, raising the advance-deposit ratio (ADR) and allowing banks to purchase excess government securities holdings.

It also allocated Tk 552.5 billion for different refinancing schemes, including the recent formation of a credit guarantee scheme to support cottage, micro and small enterprises that lack adequate assets to pledge for bank loans.