Central Bank Prints Tk70,000 Crore to Support Government Budget

In October 2023, Bangladesh witnessed a rise in private sector credit growth to 10.09%, up from September's 9.69% but notably lower than the 13.91% recorded in October 2022. Analysts express concern that this marginal growth may not truly signify effective economic development.

The Six-Month Moving Average Rate of Treasury Bill (SMART), Bangladesh's benchmark interest rate, experienced a noteworthy 29 basis points surge in November 2023, reaching 7.72% —the highest since its inception. This increase, driven by the central bank's effort to combat inflation and tighten liquidity, signals a potential rise in loan costs.

Bangladesh Bank is actively seeking to bolster its diminishing foreign exchange reserves ahead of the January 7 national election. Facing a shortage of dollars, the central bank approached private commercial banks, struggling to settle letters of credit

The Bangladesh Bank has raised the repo rate by 50 basis points to 7.75%, marking the eighth hike in 19 months, aiming to combat surging inflation. This move makes loans costlier and offers better returns to savers. The margin added to the Six Months Moving Average Rate of Treasury Bills (SMART) rate for loan extensions has also increased by 25 basis points to 3.75%.

The current account deficit has significantly reduced to $892 million from July to September 2023-24, compared to $3,678 million in the same period 2022-23 fiscal year, according to Bangladesh Bank data. The decline is attributed to robust remittances, which amounted to $5.67 billion in the first three months of the current fiscal year 2023-24.

Moody's Investors Service reports that Bangladesh faces moderate risk in its balance of payments (BoP) among South Asian countries due to a significant decline in foreign currency reserves. The forex reserve dropped from $40.7 billion in August 2021 to $19.5 billion, attributed to increased import payments, lower remittances, and export receipts.