56

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MONTHLY MARKET WRAP-UP FEBRUARY 2018

M2 growth was 10.14% (YoY) at the end of Jan’18
The country recorded 10.88% M2 growth (YoY) in FY17. During the 

first seven months of FY18, M2 grew by 3.15%, compared to end of 

FY17. Though government credit is showing de-growth for a while, 

continuous rise in private sector credit is contributing to increase 

in M2. At the end of Jan’18, total M2 of the country stood at BDT 

10,480.62 bn, recording 10.14% YoY growth. However, this number 

is much lower than the 13.30% target stated in the MPS for FY18. The 

M2 growth target was revised down from the previous MPS statement 

projection of 13.90%, but it’s quite unlikely that even the reduced 

target will be met within June 2018. In fact, the total broad money 

levels decreased by BDT 79.47bn (0.75%) MoM in Jan’18.
General P2P Inflation was 5.83% in Dec’17 (unchanged)
Inflation rate (P2P) had crossed the 6.00% mark for the first time in 

Sep’17, since it went down below this level in Jan’16. After hitting 

to 6.12% in Sep’17, general (P2P) inflation went down for the next 

three months as food prices decreased. Earlier, General P2P inflation 

rate rose to 5.94% in Jun’17 and ended FY17 with 12 month average 

inflation of 5.44%, lower than the government set FY17 inflation target 

of 5.80%.
Inflation slightly decreased in Dec’17 and stood at 5.83% (P2P). 

The 12 month average inflation is 5.70% in Dec’17. Food inflation 

increased slightly compared to Nov’17, however non-food inflation 

fell to 3.85% in Dec’17 from 4.10% in previous month. As most of 

the northern part of the country has been through flood, food inflation 

perked up during mid-2017. As of Dec’17, the general inflation rate 

remained within the stated 5.7%-6.0% range mentioned by the central 

bank in the latest monetary policy statement. But the figure is higher 

than the government’s 5.5% inflation expectation for Jun’18.
Government net borrowing decreased by 7.14% MoM on Jan’18
Government net borrowing fell in a MoM basis during January which 

is consistent with the long term trend. After moving up by 0.46% MoM 

in Nov’17, net government borrowing went back to the decreasing 

trend by falling 5.76% MoM in Dec’17 and again fell by 7.14% in 

Jan’18. Government net borrowing from the banking system started 

decreasing in Aug’16. The trend has sustained with MoM decrease in 

government net borrowing in 14 of the 18 months since then. At the 

end of Jan’18, the government’s net credit stood at BDT 810.34 bn 

compared to BDT 963.34 bn in Dec’16, down by 15.91% YoY. During 

first seven months of FY18, the government made net repayments 

of BDT 163.01 bn. The government net borrowing remains negative 

as this figure is component of M2 whreas majority of government 

borrowing is done through issuing National Saving Certificates. 
Private sector credit growth reached 18.36% (YoY) in Jan’18
The private sector credit achieved growth of 18.36% in Jan’18 

exceeding the upgraded monetary policy target of 16.8%. Private 

credit growth has now exceeded the MPS target for the seventh time 

in a row. In January, the central bank upgraded private sector credit 

growth expectation to 16.8% (from 16.3%) for FY18. Private credit 

growth started to decelerate from the beginning of FY17 and the trend 

continued until Nov’16. However, credit growth started improving 

again in Dec’16 and the growth kicked into high gear from Jun’17. 

At the end of Jan’18, the country’s total private credit stood at BDT 

8,514.15 bn, recording 18.36% YoY growth. Private sector credit 

growth reached as high as 19.06% in Nov’17. 
The increase in banks’ interest rates since late 2017 means there is a 

strong possibility of private credit growth slowing down somewhat. 

But, the FY18 figure is still likely to be higher than the 16.80% MPS 

target.

Broad Money and Inflation

Broad Money (M2)

Source: Bangladesh Bank

10.14%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

-50

0

50

100

150

200

O

ct

-1

4

Ja

n-

15

A

pr

-1

5

Ju

l-1

5

O

ct

-1

5

Ja

n-

16

A

pr

-1

6

Ju

l-1

6

O

ct

-1

6

Ja

n-

17

A

pr

-1

7

Ju

l-1

7

O

ct

-1

7

Ja

n-

18

Monthly Change (BDT bn)

Growth (YoY) (RHS)

YoY Growth of Net Credit to Government

Source: Bangladesh Bank

-15.9%

-25%

-20%

-15%

-10%

-5%

0%

5%

Jan-16

Feb-16

Ma

r-

16

Apr-

16

Ma

y-

16

Jun-16

Jul-

16

Aug-16

Sep-16

Oct-

16

No

v-16

Dec-16

Jan-17

Feb-17

Ma

r-

17

Apr-

17

Ma

y-

17

Jun-17

Jul-

17

Aug-17

Sep-17

Oct-

17

No

v-17

Dec-17

Jan-18

Inflation

Source: Bangladesh Bureau of Statistics

5.83%

7.13%

3.85%

2.50%

3.50%

4.50%

5.50%

6.50%

7.50%

8.50%

9.50%

Aug-15

Oct-

15

Dec-15

Feb-

16

Apr-

16

Jun-16

Aug-16

Oct-

16

Dec-16

Feb-

17

Apr-

17

Jun-17

Aug-17

Oct-

17

Dec-17

General (P2P)

Food (P2P)

Non-Food (P2P)

MoM Change in Net Credit to Govt. (BDT bn)

Source: Bangladesh Bank

-150

-100

-50

0

50

100

150

200

Jan

Feb

MarApr

MayJun

Jul

AugSep

Oct

NovDec

2014

2015

2016

2017

2018