The government of Bangladesh has fixed a target to increase the money supply to 16.5 percent from the existing 15.6 percent in the next two fiscals. As per a government document, in the 2022-23 fiscal the rate of money supply is at 15.6 percent. For the next 2023-24 fiscal the government has projected to increase the rate to 16 percent and for the 2024-25 fiscal it will be 16.5 percent. Academically, the enhancement of money supply might increase inflation. This kind of target of ‘broad money’ growth would further invite inflation in the country. Also read: Deposits at IBBL 'completely safe': Bangladesh Bank "Broad money" – or M2 – is a calculation of the money supply that includes all components of "narrow money", such as cash and checking deposits, and also "near money" such as savings deposits, money market securities, and other time-related deposits. M2 is a broader measure of money supply and is being closely watched as an indicator of money supply and future inflation, and as a target of central bank monetary policy. If broad money exceeds nominal GDP growth, academically, commodity prices will take another steep jump, leaving limited-income consumers and the poor to bear the brunt of the increasing squeeze on the cost of living. In 2020-21 fiscal year the money supply was 13.6 percent. ReadMore: Bangladesh seeks zero tariff on apparel exports to US at 6th TICFA meeting In the 2021-22 fiscal the proposed money supply rate was 13.8 percent, but the revised rate was 15 percent. It was increased because of the government stimulus packages to inject money in various sectors to run their activities for offsetting the impact of COVID-19 pandemic that stalled the economic activities of the whole world, as well as in Bangladesh. Apart from the impact of COVID-19 pandemic, the Russia-Ukraine war, and sanctions and counter-sanctions caused another deadly impact on the world economy as world trade was seriously damaged due to this. The prices of essential commodities, fuel oil and transportation costs increased heavily. Russia and Ukraine were one of the main sources of Bangladesh for various essential items, like wheat. Read More: Nagad is a Digital Bangladesh success story: Mustafa Jabbar As a result, the people of the country have to spend more money in purchasing their day to day essential items. To lessen the burden of fixed income group, low income group and lower middle income group people, the government has taken various types of steps. These include selling rice among 50 lakh families at the rate of Tk 15 per kg and providing special family cards to one crore people by which they will be able to procure essential commodities at fair price.

Bangladesh Bank (BB) has again decided to formulate monetary policy twice a year as per the advice of the International Monetary Fund (IMF). The central bank in a meeting with economists on Monday took the decision. As part of this, the monetary policy will start formulation for the second half of the current fiscal year in January next year, Bangladesh Bank’s chief economist Habibur Rahman, told UNB on Tuesday. “We have discussed various aspects of macroeconomics including money supply, reserve currency, and interest rates with all stakeholders including economists of the country. The current challenges of the economy were also discussed,” he added. Read more: General inflation in Bangladesh slightly down to 8.85% in Nov  As per the suggestion of the economists the central bank decided to formulate the monetary policy twice a year, he said. Monetary policy was announced twice a year since 2006. In 2019, former governor Fazle Kabir announced monetary policy formulation once a year. Accordingly, he announced the monetary policy for the fiscal year 2019-20 on July 31 of that year. The central bank announced monetary policy only once in the next financial year 2020-21 and 2021-22. Recently, the International Monetary Fund (IMF) has recommended announcing monetary policy four times a year as a condition of a getting $4.5 billion loan. Officials said the central bank announces monetary policy based on the data published by the Bangladesh Bureau of Statistics (BBS). And the statistics bureau publishes these data twice a year. As a result, Bangladesh Bank will announce the monetary policy twice a year. Read more: Business leaders oppose withdrawal of interest cap for sake of investment Bangladesh Bank will announce the monetary policy for the second half of the financial year in January.

Bangladesh Bank on Thursday unveiled the monetary policy for new fiscal year raising policy rate and slashing private sector credit growth to check inflation through tightening money flow in the market.  The policy rate also known as repo rate has been increased to 5.50 per cent from 5 per cent in the new monetary policy.  Private sector credit growth ceiling has been set at 14.1 per cent for the fiscal year 2022-23 down from 14.8 per cent of the outgoing fiscal year. BB governor Fazle Kabir announced the policy on the last working day of his over 6-year tenure, on Thursday afternoon at Jahangir Alam Conference Hall of the central bank. Deputy Governors, chief economist, executive directors and head of Bangladesh Financial Intelligence Unit (BFIU) and other senior officials of BB were present in the event Kabir said that the central bank has taken a cautious policy stance with a tightening bias in the new monetary policy. Read: BB will announce new monetary policy on June 30 It will introduce a new refinance scheme with subsidised interest rate to increase domestic production  of import-substitution for saving foreign exchange reserves, he said. “There are many products we can make in the country. The present global geopolitical issues and the Russia-Ukraine war are working as an external element for inflation and supply chain disruption. We can face the situation by enhancing domestic agro production,” Kabir said. The LC margins for luxury goods, fruits, non-cereal foods, canned and processed foods will be increased comprehensively by 75 per cent to 100 per cent to discourage their imports. BB will continue its support to implement the government's ongoing stimulus packages alongside BB's refinance schemes in the face of new adversities, including the Russia-Ukraine war in addition to the Covid-19 pandemic. The refinance scheme of Tk 3000 crore for lending to the marginal and landless farmers will be implemented 100 per cent to bring them to the production line. A review of the latest state of the global and domestic economy and the economic impact of recent floods in the northeast shows that the main challenge for the monetary policy for FY2022-23 would be to stabilize the domestic currency’s exchange rate with the US dollar, BB governor said in his speech. "At the same time, continued support for ongoing economic recovery aimed at job creation is essential for the forthcoming monetary policy,” he said. Finance Minister AHM Mustafa Kamal, meanwhile, set the government's GDP growth and inflation targets for FY 2022-23 at 7.5 per cent and 5.6 per cent respectively, he mentioned. Replying to a query the governor said that though the monetary policy is for a year, it will be reviewed after the first quarter of the year to adjust with the changing situation. Asked about his tenure he said, “I took the charge in a challenging time and the Covid-19 pandemic also made the challenges more difficult.’ Despite challenges Bangladesh’s economy remained on the right track and his priority was to keep the economy as well as money flow stable as per the situation, Kabir said. Replying to another query regarding qualification for governor of the central bank he said, the BB has several wings to research and analyze the situations and these departments help the governor to make appropriate decisions. So it is not necessary that the governor has to be from a financial background.

The 5.3 per cent inflation target, set by Bangladesh Bank’s new monetary policy, is not realist as it has been estimated on the basis of a consumption basket developed 16 years ago since when the cost of living has jumped much higher.    This observation was made by leading think-tank Centre for Policy Dialogue (CPD) at a virtual media briefing on the newly announced monetary policy statement (MPS) on Tuesday. CPD said that the consumption basket used for calculating overall general inflation was created in 2005 and so it does not reflect the current reality and actual prices in the market. Also read: Inflation declines to 5.26 in May “The poor and low income groups are increasingly finding it difficult to meet their requirements in the face of dual blows from—erosion in purchasing and income”, said Dr Fahmida Khatun, executive director of CPD in the presentation on the MPS 2021-22. She said that data shows that the 12-month average food and non-food inflation rates have fluctuated in a cyclical pattern over the past several years. “So, the inflation rate has lost its relevance to the real world”, she said, adding that the consumer price index (CPI) of medical care and health expenses increased from 156.1 in July 2012 to 251.9 in June 2021. She noted that the inflation rate of medical care and health expenses increased from 0.18% in April 2020 to 2.42% in May 2020, due to the rise in COVID-19 cases. Also read: BB unveils monetary policy for Jan-Jun period Dr Fahmida also said the share of transport in actual consumption expenditure was 15% higher than the weight in CPI. CPD distinguished fellow Prof Dr Mustafizur Rahman, director research Dr Khondaker Golam Moazzem and senior research fellow Towfiqul Islam Khan also spoke on the occasion. The CPD also said that the target for private sector credit growth at 14.8% is unlikely to be achieved as “it is very high compared to the trend in the recent past”. Indeed credit to the private sector has been largely on a declining trend since Mar 2018 – and is below 10% since November 2019. The Bangladesh Bank on July 29 announced the MPS 2021-22 setting up its different monetary targets with continuing its ongoing expansionary monetary policy amid a cautious stance for the current fiscal year (FY) to help boost recovery of the pandemic-hit economy. The CPD said the poor and low income group people should be provided with direct cash support to create demands in order to make the economic recovery from the shock of the Covid-19. It also suggested easing the conditions for the non-formal sector to ensure bank loans under the stimulus package, saying that the big businesses are taking the full advantage of the government’s financial support while micro and small businesses are far behind in the race.       About the lower private investment inflow, Dr Mustafizur said setting up a special economic zone alone cannot play an effective role to attract private investment.  “There are so many factors like ease of doing business, regulatory support, supportive infrastructure, one-stop service and also skilled manpower which need to be addressed to attract private investment”, he said. Responding to a question on the remittance management, he said the government can issue bonds in foreign currency for mega infrastructure for which it takes foreign loans. “That requirement could be met with these bonds ensuring the investment is safe and return is secured”, he added. About excess bank liquidity of about Tk 2.5 lakh crore, Dr Golam Moazzem said the Bangladesh Bank can take measures through bringing change in different mechanisms of cash reserve ratio CRR and statutory liquidity ratio (SLR). He said a joint monitoring of Bangladesh Bank and Bangladesh Securities and Exchange Commission (BSEC) is essential to ensure that the money provided by the government’s stimulus package is not invested in stock market. 

Funding and expanding collateral for debt have been made easier by Japan’s central bank for cash-strapped companies in response the growing economic damage from the coronavirus pandemic.

In its semi-annual monetary policy report delivered to Congress on Friday, the U.S. Federal Reserve said that the current stance of monetary policy was appropriate as downside risks to the U.S. economy had receded.