The monetary and credit policy for the financial year that ended in June, 2000 was formulated with the objective of full utilization of domestic resources and rapid economic growth through priorities for agriculture, industry, export, and expansion and strengthening of the private sector, at the same time keeping inflation within tolerable limits. A modern expansionary monetary and credit policy was adopted in order to make good the losses to agriculture, industry, and infrastructure by the devastating floods of 1998. After the flood the economy remained sluggish in the first quarter of 1999-2000 and the private sector demand for credit shrank. In view of this, the Annual Development Program (ADP) was expanded and development activities in the private sector were geared up. As a result, the public sector absorbed credit at an accelerated rate. Though credit to the private sector picked up towards the end of the year, the overall annual growth was smaller than programmed, although gross domestic credit expanded a little faster than projected. Money supply increased by 15.3% in 1999-2000 compared to the expansion of 8.6% in the preceding year.

Narrow Money increased by Tk. 2,631.90 crores or 15.3% to Tk.19881.30 crores in 1999-2000. Of the components of Narrow Money, currency outside banks went up by Tk.1489.40 crores or 17.2% to Tk.10176.00 crores, and demand deposits went up by Tk.1142.50 crores or 13.3% to Tk.9705.30 crores.

Broad Money increased by Tk.11735.70 crores or 18.6% to Tk. 74,762.40 crores in 1999-2000 compared to the increase of 12.8% in the preceding year. Of the components of Broad Money, Narrow Money increased by 15.3% and time deposits rose by 19.9% compared to the increase of 8.6% in Narrow Money and 14.5% in time deposits in the preceding year. The shares of currency outside banks, demand deposits and time deposits in Broad Money stood at 13.6%, 13.0%, and 73.4% respectively on 30th June, 2000 compared to 13.8%, 13.6% and 72.6% respectively on 30th June, 1999. Expansion of credit to the private sector, government sector (net), public sector, and other assets (net), along with a surplus in net foreign assets contributed to the expansion of Broad Money.

Reserve Money increased by Tk.2321.80 crores or 15.7% to Tk.17064.50 crores in 1999-2000 compared to the increase of 8.3% during the preceding year. Of the components of Reserve Money, currency outside banks increased by Tk.1489.40 crores or 17.1% compared to the increase of Tk.533.30 crores or 6.5% during the preceding year. Scheduled banks balances with the Bangladesh Bank increased by Tk.770.90 crores or 15.3% in 1999-2000 compared to the increase of Tk.488.20 crores or 10.8% in the preceding year. Their cash in tills increased by Tk.61.50 crores or 6.0% as against the increase of Tk.103.60 crores or 11.2% in the preceding year. The increase in Bangladesh Bank's credit to the government (net) by Tk.1,738.10 crores and net surplus in the foreign sector by Tk.1,262.40 crores played the main role in exerting expansionary influence on the Reserve Money. However the decline of Tk.333.60 crores and Tk.44.90 crores in the borrowings by the scheduled banks and other financial institutions respectively along with the fall of Tk.300.20 crores in other assets (net) partly offset the expansionary impact of those sectors.

Total domestic credit increased by Tk.8581.20 crores or 13.6% to Tk. 71,489.00 crores (including adjustment of bonds issued by the government) in 1999- 2000 as compared to the increase of Tk.7267.60 crores or 13.1% in the preceding year. Expansion of credit to the government, private, and public sectors to the extent of Tk.3524.30 crores (31.3%), Tk.4906.10 crores (10.7%), and Tk.150.80 crores (2.5%) respectively contributed to the expansion in total domestic credit in 1999-2000. Credit to the government and private sector had increased by 21.3% and 13.8% respectively, while credit to the public sector declined by 3.7% in the preceding year.

The outstanding level of bank credit (excluding foreign bills and inter-bank items) increased by Tk.5,123.30 crores or 10.3% to Tk.54,646.10 crores in 1999- 2000 as compared to the increase of 12.4% in the preceding year. Of the components of bank credit, advances increased by Tk.4892.70 crores or 10.3% and the bills purchased and discounted went up by Tk.230.60 crores or 11.3%.

Bank deposits (excluding inter-bank items) increased by Tk.11044.70 crores or 18.6% to Tk.70,278.70 crores in 1999-2000 compared to the increase of 14.2% in the preceding year. Of this increase , time deposits went up by Tk.9,103.80 crores or 19.9% to Tk.54,881.10 crores, government deposits by Tk.723.60 crores or 14.8% to Tk.5,615.20 crores and demand deposits by Tk. 1,142.50 crores or 13.3% to Tk.9,705.30 crores. On the other hand, restricted deposits increased by Tk.74.80 crores in 1999-2000.

Statutory CRR with Bangladesh Bank was lowered for the scheduled banks to 4.0% of their liabilities (demand plus time deposits) (excluding inter-bank deposits) from 5% with effect from 1st October, 1999.

The Bank Rate was lowered from 8.0% to 7.0% on 29th August, 1999 and remained unchanged through 30th June, 2000.