Govt aims to increase money supply to 16.5pc in next two fiscals

The government has fixed a target to increase the money supply to 16.5 per cent from the existing 15.6 per cent in the next two fiscals.

As per a government document, in 2022-23 fiscal, the rate of the money supply is at 15.6 per cent.

For the next 2023-24 fiscal, the government has projected to increase the rate to 16 per cent and for 2024-25 fiscal it will be 16.5 per cent.

Academically, the enhancement of the money supply might increase inflation. This kind of target of ‘broad money’ growth would further invite inflation in the country, reports UNB.

"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 the 2020-21 fiscal year the money supply was 13.6 per cent.

In 2021-22 fiscal the proposed money supply rate was 13.8 per cent, but the revised rate was 15 per cent.

It was increased because of the government stimulus packages to inject money into various sectors to run their activities for offsetting the impact of the COVID-19 pandemic that stalled the economic activities of the whole world, as well as in Bangladesh.

Apart from the impact of the 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.

As a result, the people of the country have to spend more money on purchasing their day-to-day essential items.

To lessen the burden of the fixed-income group, low-income group and lower-middle-income group people, the government has taken various types of steps.

These include selling rice to 5.0 million families at the rate of Tk 15 per kg and providing special family cards to 10 million people by which they will be able to procure essential commodities at a fair price.