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The central bank has been urged to extend policy support to the services sector under its monetary policy, which was announced on Thursday last, as a strategy to prevent fund diversion to unproductive sectors.
"Services sector could be a good opportunity for which supportive policies need to be announced," Business Initiative Leading Development (BUILD)) said on Saturday, in reaction to the Monetary Policy Statement (MPS) for the fiscal year (FY) 2021-22.
The BUILD noted that the banks had an excess liquidity of Tk 2.31 trillion as of June 30, 2021, because of poor private sector credit disbursement.
Under such a situation, it said, the banks' investment may divert to alternative sectors such as stocks and bonds or even in real estates, creating an asset bubble in the economy.
Instead, the public-private dialogue platform recommended providing extended support to the informal sectors - micro, cottage and small entrepreneurs - to help them overcome the Covid-induced fallouts.
BUILD said a large number of entrepreneurs who belong to the informal sector are suffering from the pandemic because of the small amount of monetary support.
"Bangladesh Bank's policies to support these segments need to be more comprehensive," it suggested.
It also suggested that the government may announce a specific second round of stimulus packages (SPs) with an allowance for new employment as well as retention of employment for encouraging investors.
BUILD also appreciated the MPS for its being expansionary and accommodative with some specific measures meant to mitigate damages surfaced in the economy because of the pandemic.
It noted that considering the covid situation and lack of assertiveness of businesses in investment, the MPS targeted for private sector credit growth at 11 per cent and 14.8 per cent for the first and second half of the FY 2022, while the public sector credit growth target is 30.6 per cent and 32.6 per cent respectively.
There are several policy supports extended by the Bangladesh Bank in respect of loan moratorium, extension of usance period of L/C for import of essential goods, Credit Guarantee Scheme, Start Up Loans, Technology Upgradation Fund of Tk. 10 billion, extension of EDF and so on.
The platform said the investment situation is not improving, however.
"Because of low credit growth in the private sector, broad money supply has been reduced, which is described by the Bangladesh Bank as one of the reasons for containment of the inflation rate".
MPS mentioned that about Tk.1.35 trillion with 28 stimulus packages (SPs) have been announced by the government to contain the impact of covid-19.
"Disbursement of the fiscal incentives to the required areas are limited. Many entrepreneurs could not get support from these SPs, especially the CMSMEs. Special attention and supportive policies are to be announced for micro, cottage and small entrepreneurs," the BUILD noted.