Skip to main content

How printing money without creating real assets fuelled inflation?


The Bangladesh Bank’s decision to print money without backing it with real assets has contributed to significant inflation in Bangladesh. Starting in June 2022, the central bank injected funds into financially distressed banks, mainly linked to the S Alam Group, by creating new money without securing corresponding assets. Over the fiscal years FY23 and FY24, this approach increased reserve money by an unprecedented Tk66,000 crore, causing the taka to lose value, which contributed to inflation.

Reserve money, which forms the monetary base, reached a historic Tk4.13 lakh crore by June 2024. However, this increase was largely due to domestic asset creation, as net foreign assets fell by Tk1 lakh crore, further weakening the currency. When domestic assets rise and foreign assets fall, there’s an oversupply of taka relative to dollars, leading to depreciation of the taka and increased inflationary pressure, as explained by former Federal Reserve official Sabeth Siddique.

Bangladesh Bank's money-printing strategy, rather than fostering economic growth, worsened the situation by not generating real assets. If the printed money had been directed toward productive uses, such as importing materials for export industries, it might have stimulated growth. Instead, declining imports and exports reflected a lack of productive investment, worsening the supply-demand imbalance and driving inflation.

In August 2023, under pressure from the IMF, Bangladesh Bank stopped using its "devolvement" process to print money and began using other mechanisms, like overdrafts and Ways and Means Advances, continuing to support banks through newly created funds. Notably, S Alam-controlled banks, such as Social Islami Bank, maintained aggressive lending practices and continued operating despite severe liquidity shortages due to central bank support. These banks faced mounting financial instability, and the Bangladesh Bank had to issue over Tk1.45 lakh crore in support from FY23 to FY24.

A change in government in August 2024 marked a shift. The Bangladesh Bank halted money printing, restricted struggling banks' operations, and allowed them to borrow under guarantees from other banks. Additionally, the new leadership imposed limits on banks' business activities, dissolved boards at politically influenced banks, and introduced a new liquidity support framework aimed at stabilizing the banking sector.

In essence, Bangladesh Bank’s approach of printing money without real asset backing, primarily to support weak banks, fueled inflation, depreciated the taka, and put the economy under strain. Only recently has the central bank made moves to address these issues by imposing stricter oversight and reducing dependency on printed money.
#Bangladesh #Economy #TopNews #TBS #JebunNesaAlo

Comments

Post a Comment

Popular posts from this blog

The consequences of not paying Zakat!

  The consequences of not paying Zakat! All the decrees of Allah are for the universal welfare of man. Every command and prohibition of Allah Ta'ala has two types of results or consequences. An afterlife will be found and that is the key. The consequences of disobeying His orders are still felt today, though many times people do not realize it. Consequences of not paying Zakat: First of all: Since the wealth of the rich has the right of the poor and destitute, if Zakat is not paidProperty remains the property of others. As a result it is not holy. Allah does not bless impure wealth and the possessor of that wealth is deprived of Allah's mercy. Not only that, the people who do not pay Zakat or Sadaqah, Allah sends worldly punishments like drought and famine on them. The Prophet (PBUH) said, "If a community refuses to give Zakat, Allah punishes them with famine" (Tabarani). Secondly:Rasulullah (SAW) said, "Whoever gives zakat in the hope of reward, there...
Post a Comment
Read more

The Untold Feelings of The Women's!

A man can have sex with a woman without having any feelings for her. But, a woman does not have sex with a man unless she develops enough feelings for him. Most men just need an excuse to have sex. But most women need a reason to have sex. A man can go to great lengths to spend a long time having sex with a woman just once. of sexWhen the man thinks that he is having sex with the woman in love; But the truth is - he is having sex for a maximum of five minutes, intoxicated by the lust of the woman's physical folds, the beauty of the skin, the swelling of the hips and breasts, and other beauties; And after ejaculation the woman is forgotten. Coming from a long distance, sacrificing a lot for this, along with bringing gifts, hotel-food and other expenses may seem - theseAn expression of love. In fact - all of this has only one goal: sex. Bekubita is - most women consider these things to be love, jump and fall into the arms of men. It is precisely for this reason that clever men d...
Post a Comment
Read more

How to Conduct Audience Research For SEO:A Simplified Guide!

To excel in SEO, understanding what your audience searches for and why is crucial. Audience research unveils the intent behind search queries, helping you align strategies with user needs. This approach can uncover search behaviors, map audience intent, and identify SEO opportunities, even with limited resources. Traditional Audience Research: Methods and Challenges Traditional audience research focuses on demographic, psychographic, and behavioral insights to build audience personas. It often involves: Surveys: To gather customer feedback. Focus Groups and Interviews: To understand audience preferences and behaviors. However, as advertising pioneer David Ogilvy noted, traditional research can be flawed because people often don’t act as they say. Tools like Similarweb, Audiense, and Brandwatch can assist in audience segmentation but may not fully capture search behavior or intent. A Better Approach: Audience Research for SEO SEO-focused audience research analyzes search behavior to unc...
Post a Comment
Read more