BD holds rates steady

DHAKA: Bangladesh’s central bank left key interest rates unchanged on Wednesday with Governor Fazle Kabir saying it was trying to balance economic growth and inflation risks.

It left the policy repo rate at 6.75 percent and the reverse repo rate at 4.75 percent. Bangladesh´s annual inflation eased to 5.44 percent in the financial year that ended in June, as non-food prices rose at a slower pace but food prices climbed to a two-year high on the back of a spike in rice prices.

Kabir said policy would be aimed at keeping average inflation below 5.5 percent in the 2017/18 financial year that started in July while achieving the government´s 7.4 percent growth target.

"Looking ahead, output growth momentum remains robust, but low export growth in the previous fiscal year and a drop in workers´ remittances pose risks to external and domestic demand-led growth outlook for the current fiscal year," Kabir said.

Broad money and private sector credit growth targets for the current financial year were set at 13.9 and 16.3 percent, respectively, down from previous year’s target of 15.5 and 16.5 percent.

Bangladesh´s exports in the previous fiscal year rose 1.7 percent from a year earlier, but that was the slowest growth in 15 years, while pivotal garment sales posted only 0.2 percent growth.

Garment exports, the key driver of Bangladesh´s $200 billion-plus economy, helped reserves hit a record of more than $33.49 billion by the end of June. Remittances are Bangladesh´s second-biggest source of foreign income but they fell 14.5 percent to $12.8 billion in the last financial year, with much of the decline blamed on the impact of lower energy prices on Middle East employment.