Tk20,000cr BB borrowing may stoke inflation
The government injected Tk20,000 crore of high-powered money into the economy in March by borrowing from Bangladesh Bank, a move that could heighten inflationary pressure, warned Ashikur Rahman, chief economist of the Policy Research Institute (PRI).
Presenting a keynote paper at PRI’s Monthly Macroeconomic Insights event in Dhaka on April 23, Ashikur said the borrowing effectively represents newly created money.
“This is high-powered money essentially printed money which may push inflation upward,” he noted.
He cautioned that Bangladesh’s macroeconomic stability is under strain from global uncertainties, including geopolitical tensions in the Middle East, policy unpredictability, and the challenges of graduating from least developed country (LDC) status.
Stressing the importance of reform momentum, he said stepping back now would be counterproductive and urged improvements in bank resolution mechanisms while avoiding unnecessary friction around IMF programmes.
At the same event, Mahbubur Rahman, president of the International Chamber of Commerce Bangladesh (ICCB), highlighted persistent gas and electricity shortages as a major obstacle to investment.
He said uncertainty over energy supply is discouraging business expansion and called for stronger coordination between the government and the private sector.
Mahbubur also pointed to structural weaknesses in the banking sector, limited access to credit, and rising non-performing loans as key constraints.
As a result, businesses are proceeding cautiously with new investments and industrial expansion.
He added that high inflation is raising living costs, putting pressure on low- and middle-income groups, and urged policymakers to avoid excessive money supply and unnecessary public spending while restoring discipline in the financial sector, including considering bank mergers if needed.
Speakers at the event emphasised that IMF-backed reforms should be viewed as essential for long-term stability rather than external conditionalities.
Khondokar Shakhawat Ali, visiting research fellow at Brac Institute of Governance and Development (BIGD), said Bangladesh faces both domestic and external challenges.
He warned that elements of “crony capitalism” are distorting the investment climate and undermining economic efficiency.
Despite growth in bank deposits, governance gaps persist, he said, stressing the need to curb money laundering and improve transparency.
He further cautioned that financing subsidies through excessive money creation would fuel inflation and directly impact ordinary citizens, while stagnant employment is emerging as an additional concern.
PRI Chairman Zaidi Sattar described the proposed reforms as “national economic imperatives,” warning that failure to implement them would amount to self-inflicted economic damage.
He noted that an elected government has the capacity to carry out such reforms, drawing parallels with the sweeping changes of 1991 that reshaped Bangladesh’s economic trajectory.
Other speakers included Clinton Pobke, deputy head of mission at the Australian High Commission; former NBR chairman Muhammad Abdul Mazid; and Meghna Group of Industries Director Tanjima Mostafa.
The session concluded with remarks from PRI Research Director Bazlul H Khondker.
