Govt aims to raise broad money supply in FY24, FY25

The government has fixed a target to increase the money supply to 16.5% from the existing 15.6% in the next two fiscals.

As per a government document, in FY23 fiscal the rate of money supply is at 15.6%.

For FY24 the government has projected to increase the rate to 16% percent and for FY25 it will be 16.5%.

Academically, the enhancement of money supply might increase inflation.

This kind of target of broad money growth would further invite inflation in the country.

"Broad money" -- or M2 -- is a calculation of the money supply that includes all components of "narrow money", such as cash and checking deposits, and also "near money" such as savings deposits, money market securities, and other time-related deposits.

M2 is a broader measure of money supply and is being closely watched as an indicator of money supply and future inflation, and as a target of central bank monetary policy.

If broad money exceeds nominal GDP growth, academically, commodity prices will take another steep jump, leaving limited-income consumers and the poor to bear the brunt of the increasing squeeze on the cost of living.

In FY21 the money supply was 13.6%.

In FY22 the proposed money supply rate was 13.8%, but the revised rate was 15%.

It was increased because of the government stimulus packages to inject money in various sectors to run their activities for offsetting the impact of Covid-19 pandemic that stalled the economic activities of the whole world, as well as in Bangladesh.

Apart from the impact of Covid-19 pandemic, the Russia-Ukraine war, and sanctions and counter-sanctions caused another deadly impact on the world economy as world trade was seriously damaged due to this.

The prices of essential commodities, fuel oil and transportation costs increased heavily.

Russia and Ukraine were one of the main sources of Bangladesh for various essential items, like wheat. 

As a result, the people of the country have to spend more money in purchasing their day to day essential items.

To lessen the burden of fixed income group, low income group and lower middle income group people, the government has taken various types of steps.

These include selling rice among 5 million families at the rate of Tk 15 per kg and providing special family cards to 10 million people by which they will be able to procure essential commodities at fair price.