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Election-centric money flows from and into the banking system surge as Bangladesh goes to the polls soon, with a domino effect on the economy.
As the money market and public wallets fatten, a worrisome major macroeconomic parameter-inflation-takes in some new heat, analysts say.
Apart from the broad money supply, upswing in the volume of currency outside the banks is also observed after months of downswing as election campaigns gather pace.
Officials and money-market analysts have said money supply or broad money normally goes up largely before any general election, driven by intensified campaign spending, increased public demand for cash, and, in some cases, voter-inducement tactics.
According to data with Bangladesh Bank (BB), the broad money supply or M2 on the market surged to nearly 10 per cent at the end of December 2025 although the money-supply growth was hovering in-between 6.0 per cent and 8.0 per cent throughout the last calendar year save December.
In the other course of outflow from the banking system, currency outside the banks had risen remarkably in the last couple months till January 2026 with the figure having crossed Tk 3.00 trillion from the November count of Tk 2.69 trillion, according to the sources.
Seeking anonymity, a BB official says both money supply and cash held by the public continue rising in recent weeks due mainly to the upcoming national elections scheduled to be held on February 12.
Citing last December data, the central banker says the money supply rose to around 10 per cent, much higher than the projection of monetary- money statement at 7.80 per cent by end-December.
"The money supply is rising in such a way that it might have crossed 11 per cent by January last and it could further enhance inflationary burden in the coming days," he told The Financial Express.
The central banker also informed that the volume of mattress money bloated by more than Tk 300 billion in two months to cross Tk 3.00 trillion in the just-past January as public cash demand shot up ahead of the election.
Fed on the money flows, inflation in the country went up for the third month in a row with the overall rate having climbed to 8.58 per cent in January, up from 8.49 per cent in December, 8.29 per cent in November and 8.17 per cent in September last.
Director-General of Bangladesh Institute of Bank Management (BIBM) Dr Md. Ezazul Islam says the net foreign-asset growth in the banking system was around 30 per cent because of growing inflow of remittance ahead of the polls and Ramadan.
To prevent price fall of the taka in exchange with the US dollar, the banking regulator continues making intervention by way of buying the American greenback from the commercial banks and injecting liquidity into the market.
"This plays a major role in money-supply surge," says Dr Islam, also former BB executive director.
According to the BB statistics, the central bank since July 13 last had purchased $4.52 billion up to February 05 and injected over Tk 550 billion into the market.
Seeking anonymity, the treasury head of a private commercial bank says the volume of cash withdrawals from the banks is on the rise in recent weeks, putting some sort of pressure in liquidity management.
"But we managed it considering the current market demand and the BB's forex intervention helps us cope with the pressure," the bank executive told the FE writer.
Founding Chairman of Policy Exchange Bangladesh Dr M. Masrur Reaz says the election-related activities of the political parties officially got momentum from December last when the election commission announced the schedule.
Because of the fact, the money supply on the market continues to rise as election comes closer.
The economist notes the banking regulator bought over $4.50 billion and a major chunk of the purchase done in the last two months -December and January. "And the money supply keeps mounting, which could cause inflation spike further in the coming days."
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