In recent months, Bangladesh Bank has witnessed a decline in its stock, amounting to Tk 3.3 trillion as of mid-March, signaling a pause in the printing of ‘high-powered’ money.
This contraction, also known as ‘reserve money,’ is perceived as a positive development by some economists, as it may help alleviate inflationary pressures amidst rising prices of goods and services.
The reduction in reserve money, a key instrument wielded by the central bank, reflects a decline of 11.86 percent from June 2023 to March 14, 2024. This decrease in reserve money translates to a tightening of monetary policy, typically resulting in an increase in interest rates and reduced borrowing for non-essential expenditures, thereby curbing inflationary tendencies.
Officials familiar with Bangladesh Bank’s operations attribute the decline in net foreign assets to the sale of higher volumes of the US dollar to meet urgent liabilities, particularly related to government procurement of goods from abroad.
While this reduction in reserve money is seen as a positive step in combating inflation, economists caution against the adverse impact on the country’s dollar reserves.
