BB Cash Issuance Reaches Tk 2 lakh 83 thousand 700 crores

The government of Bangladesh has stopped borrowing from the central bank, instead repaying previous loans, resulting in a reduction of Tk 18,250 crore in government debt to Bangladesh Bank during July-August of the current fiscal year. However, the government borrowed Tk 28,952 crore from commercial banks in the same period, bringing the net debt from the banking sector to Tk 10,702 crore. This shift is part of Bangladesh Bank's effort to control inflation by avoiding money printing for government loans.

In a circular issued the central bank announced a 2.5% incentive on remitted compensation paid by insurers or employers to expatriates due to physical injury or death. This is the first time such compensation will receive an incentive. The circular stated that the incentive would take effect immediately from the date of issuance.

Bangladesh is shifting towards a free-floating currency system by redirecting banks to obtain foreign exchange 

from the interbank market instead of receiving direct dollar sales from the central bank. This policy change aims to address the country's rapidly depleting forex reserves. Previously, the Bangladesh Bank (BB) sold $12.80 billion and bought $3.38 billion in the fiscal year 2023-2024, but has now reduced sales significantly, with $678 million sold in July and $170 million in August, while buying only $115 million.

The Bangladesh Bank has announced a series of significant measures to address challenges in the banking sector. The policy rate is set to increase to 10% within the next 1-2 months to control inflation, as stated by the Association of Bankers Bangladesh (ABB) Chairman.

The recent unrest and subsequent anarchy following the ousting of the Hasina government have sharply disrupted supply chains, intensifying inflationary pressures on an already strained economy.  In July, food inflation surged to 14%, the highest in 13 years, while overall inflation increased by 1.94 basis points to 11.77% from the previous month. In response, the newly appointed Governor of BB raised policy rates by 50 basis points to 9%, making bank borrowing more expensive.

A recent Bangladesh Bank (BB) report suggests that Bangladesh should focus on expanding export markets before fully embracing local-currency settlements in external trade. The study, "Trading in Local Currencies: Problems and Prospects for the SAARC Countries," led by BB's Executive Director (Research), notes that despite the initiation of trade settlements in Indian rupees (INR) in mid-2023, this approach has not yet gained significant traction.