Govt debt increased 3-time with new note

Mahfuz Emran: The government has set a record of borrowing money from Bangladesh Bank. The government has taken a loan of Tk 97,684 crores from the central bank in the last financial year, breaking all previous records. Tk 31,324 crores were taken in the previous financial year.
It has taken more than three times the debt during the discussion period. Due to reduced liquidity, the borrowing capacity of commercial banks has decreased. Due to the economic recession, the government has to take additional loans due to low revenue and increased expenditure.
As a result, the government was forced to borrow money from the central bank. On the one hand, the flow of money increases and the pressure on inflation increases. On the other hand, the value of money decreases and reduces the purchasing power of people.
The former governor of the central bank regarding the government’s excessive borrowing from the central bank Salehuddin Ahmed said, taking a loan from the central bank increases the flow of money in the market. Which plays a major role in increasing inflation. Implementation of monetary policy is disrupted. If this money is spent on productive activities, it can alleviate the pain of inflation to some extent by increasing employment and production.
But if spent on daily activities, it is more dangerous. The government is now using central bank loans to meet current expenditure. Due to which inflation continues to rise.
According to the Bangladesh Bank report, the government recorded excessive borrowing from the Central Bank in the last financial year. Similarly, in the last fiscal year 2020-21, a record has been set by repaying the debt of Tk 19,811 crore rupees. In other words, the government did not take any loan from the central bank in that year. Instead, he paid off the previous debt.
According to sources, central bank loans mean printed money. The central bank prints money throughout the year. Printed money is kept in vaults. While in the vault, it is called ‘tangible or non-live’ money. If the demand increases in the market, money is released. When printed money is in the market, it is called ‘live’.
That is, worthless paper in the vault and valuable currency in the market. This money of the central bank is called hyperpowered money or high-power money. They come into the market and increase the flow of money several times. It creates pressure on inflation and reduces people’s purchasing power, increasing public suffering.
There is no regulation of government borrowing from the central bank. However, taking this loan is discouraged. Because it will increase public suffering. However, when the government is in financial crisis, it borrows from the central bank. All the countries of the world do it. At the time of Corona, the US central bank, the Federal Reserve System, released three trillion dollars in the market.
Presently the currency supplied in the market is around Tk 19 lakh crore. Of this, Tk one hundred and three lakh crore are in the market in printed form. The rest of the money is not notes, but in the form of electronic or plastic money. All money except cash notes is in electronic form.
In July and August of the current financial year, the government did not take any new loan from the central bank. Rather, some previous debts have been paid. However, they have taken a loan of about Tk 16,000 crores from commercial banks. As a result, the effect of printed money in the market has decreased somewhat. At present, the various development activities of the government have yet to take place. Apart from this, the government is following austerity policies.
Due to these reasons, the loan from the central bank has decreased. Meanwhile, the private sector is suffering from uncertainty due to the economic downturn. That is why they are not taking loans. Because of this, the government is now taking loans from commercial banks.
In June last year, the liquidity in the bank was Tk 4 lakh 42 thousand crores. Last June it decreased to Tk 421,000 crores. Liquidity decreased by Tk 21,000 crores in one year.
According to sources, the government’s revenue has decreased due to the economic downturn. On the contrary, government expenditure has increased. In particular, incentives have to be given to various sectors to counter the negative impact of the recession. The increase in the value of the dollar has led to an increase in the cost of imports. This has increased the cost of the government. As a result, additional loans have to be taken. Due to reduced liquidity in commercial banks, borrowing from them has to be reduced.
In the last financial year, the government took a loan of Tk 25,000 crores from commercial banks. Non-banking sector has taken Tk 27,000 crores. In the previous financial year, Tk 44,000 crore were taken from this sector.
According to the information obtained from the report of the central bank, in the last fiscal year 2022-23, the government has taken a loan of Tk 97,684 crore from Bangladesh Bank. Tk 31,324 crores were borrowed during the same period of the previous financial year. Government borrowing from the central bank has more than tripled during the period under discussion. Which has never happened in the past.
In the fiscal year 2021-22, the revenue of the government increased by 17.5 percent. Last year revenue increased by 11 percent. But the cost has increased by 17 percent. As a result, more loans were taken to meet the deficit.
From the report, it can be seen that in the financial year 2017-18, the government took a loan of Tk 3,973 crores from the central bank. In the financial year 2018-19, it has more than doubled to Tk 10,258 crores. In the financial year 20219-20, the loan has slightly increased to Tk 10,409 crores. At the end of this financial year, the loan from the central bank increased due to Corona.
The government has not taken any new loan from the central bank during the financial year 2020-21. Instead, the previous loan was repaid by Tk 19,811 crores. In the same year, due to the decrease in the rate of implementation of development projects, the loan decreased. In the financial year 2021-22, the loan from the central bank has increased to Tk 31,304 crores. In the last financial year, which has increased more than three times to Tk 97,684 crores. In July-August of the current financial year, the previous loan was partially repaid.
The inflation rate increased to 9.69 percent last July due to government borrowing from the central bank, increase in commodity prices and increase in dollar price. This rate increased further in August. In this, the food inflation rate is increasing more.