The central bank will encourage credit growth in the private sector in an effort to raise economic growth to 7.2 percent, the highest ever target set by the government for the current fiscal year.

The Bangladesh Bank will put all its efforts to achieve the GDP growth target, defying gloomy forecasts made by multilateral lending agencies in the backdrop of a financial crisis in the Eurozone.

The central bank on July 18 will announce the new monetary policy for the current fiscal year where it will raise the target of private sector credit growth over the existing monetary policy target to achieve the goal.

The BB announces monetary policy twice a year -- in January and July.

In the current fiscal year, the private sector credit growth target is going to be set at more than 18 percent, up from 16 percent in the existing monetary policy announced in January.

An official of the central bank said, alongside the higher growth target, a restrained policy stance will also be pursued and credit to unproductive sectors will be discouraged to curb inflationary and external pressures.

BB Governor Atiur Rahman on Wednesday told The Daily Star that the monetary policy will have three main targets: achieving employment-led growth, bringing down inflation to 7.5 percent, and ensuring inclusive growth.

Another BB official said economists on several occasions complained that monetary policy does not work in Bangladesh. But most of the monetary policy targets were met in the last fiscal year, he added.

The official said they will achieve the goals this year too.

The Asian Development Bank in its "supplementary outlook" released yesterday said a debt crisis in the Eurozone and a slow recovery in the US will cast a shadow on growth outlook in some South Asia countries including Bangladesh.

However, the BB official said if the monetary policy and the fiscal policy can be coordinated properly, the growth target will be met.

Inflation also could be brought down within the target, he added.

From the beginning of fiscal 2011, inflation has been increasing every month, and non-food inflation crossed double digit for the first time.

However, due to the restrained monetary policy, non-food inflation could be brought down by 1 percentage point in the last fiscal year, he said.

The BB official said they will ask the government to cut the target of government borrowing from the banking sector in the current fiscal year to increase credit flow in the private sector.

He said the government borrowed Tk 8,000 crore less than the target of borrowing from the banking system in the revised budget of the last fiscal year.

The official also said, besides inflation, the pressure on exchange rate has eased much because of the government steps taken under the monetary policy.

The balance of payments had been in deficit for several months before turning surplus by $11 million during July-May last fiscal year, compared to the same period a year ago.

Apart from this, the exchange rate, which had been increasing gradually in the recent times, has started to fall.

The central bank official said they are now buying foreign currency from the market to prevent much appreciation of the taka against the dollar.

The Daily Star/Bangladesh/ 13th July 2012