Tk 18,500 cr released in 5-month
Zarif Mahmud: To deal with the economic crisis, the supply of currency from the central bank to the market has been increased. This has increased the demand for cash. To meet this demand, a record amount of printed money has been released in the market. Efforts are being made to keep the economic activities running by releasing this money against various assets and under incentives. Due to excessive borrowing by the government from the central bank, the demand for cash in the market has also increased.
Due to this, the trend of leaving notes has increased. Inflation rate is under pressure. Over Tk 18,500 crore of cash was released in the market in July-November last year. Tk 129 crore was released during the same period of the previous year. At the time of Corona, a maximum of Tk 38,000 crore was released in the market.
The total currency supplied till last November is Tk 17 lakh 41 thousand crore. Out of this, Tk 2 lakh 75 thousand crore are in the market in the form of printed notes. Which is 15.80 percent of the total currency issued. Which is 2 to 3 percent more than the normal period. The remaining Tk 14 crore 66 lakh are not in the market in the form of printed notes. These are in the form of electronic or plastic money. Which are being transacted through different types of cards, online or banks.
In July-November 2022, notes printed by the central bank reached the market of Tk 18,417 crore. Tk 129 crore in the same period of the previous year. The flow of notes printed increased 143 times during the period. In July-December 2022, it increased to more than Tk 19 thousand crore. In the same period of 2021, there was an increase of Tk 5600 crore. It has increased 3 and a half times during the discussion period. In the same period of 2020, instead of releasing money printed in the market, Tk 5024 crore were withdrawn.
In the current financial year, the GDP size is Tk 44 lakh crore. 7 percent of the total GDP is released in the form of notes in the market. 3 to 4 percent of GDP is issued in the form of notes in developed countries or in countries with high cashless transactions. Cash inflows are high in underdeveloped countries or countries where cash transactions are high. As happened in Bangladesh. Note flow in India as a proportion of GDP is higher than Bangladesh. Because cash transactions are more in India. In European and American countries, cash transactions are less and the printed notes are also less. Card transactions are increasing in those countries.
In June 2022, Tk 2 lakh 56 thousand crore were in the market in the form of printed notes out of the Tk 17 lakh 08 thousand crore currency supply. Which is 15 percent of the total currency. Compared to June 2021, money printed increased by Tk 29 thousand crore or 12.78 percent.
In June 2021, out of Tk 15 lakh 61 thousand crore currency, Tk 2 lakh 27 thousand crore was in the form of notes. Which is 14.54 percent of the total currency. Tk 19 thousand crore or 9.13 percent increase compared to June 2020.
Currency supply in June 2020 was Tk 13 lakh 74 thousand crore, of which printed notes were Tk 2 lakh 08 thousand crore. Which is 15.14 percent of the total currency. Compared to June 2019, there was an increase of Tk 38 thousand crore or 22.35 percent.
The total currency supply in June 2019 was Tk 12 lakh 20 thousand crore, of which cash was Tk 1 lakh 70 thousand crore. Which is 13.93 percent of the total currency. Compared to 2018, the supply of cash increased by Tk 15,000 crore or 9.67 percent.
An official of the central bank said that printing money is a continuous process. The money is squeezed and stored in the vault. According to the demand is released in the market. Most of these are issued against foreign currency and non-negotiable notes. Notes without assets are not offered in the market. Inflation can increase if money is released to a large extent. Taking this into account, money is withdrawn as well.
The central bank controls the flow of money. They are the ones who control the printing of money. After the money is printed, it is stored in the high security area of the mint. According to the demand of the central bank they are given to the branches.
Why is money printed: Money is printed for various reasons. During an economic crisis, when there is a calamity or lack of confidence, when the government’s revenue decreases, when the central bank borrows money, when the size of the economy increases, when remittances or dollar flows increase, money is printed to cover the deficit by issuing non-circulatory notes.
A central bank cannot print money at will. In this case, some rules have to be followed. Money has to be printed against various assets.
When there is an economic crisis in the country, money is released in the market. Through this the economy recovers. As has been done during Corona. At that time, the central bank promised to provide Tk 1 lakh 23 thousand crore under various incentives. This has increased the supply of currency. Because of this, Tk 38 thousand crore are printed and given to the market. The full amount was not paid in cash.
The government borrows from the central bank for various reasons. This money is given to the government in electronic or cashless form. In this case, the government holds various bonds. In July-December of the current fiscal year, the government has taken a loan of Tk 65,605 crore from the central bank. Which is a record compared to any time in the past. Central bank loans increase the flow of money in the market. Then the demand for cash transactions also increases. Money is also printed against it.
If the production of the country increases, the wealth increases. Then the supply of money in the hands of people increases. It increases cash transactions. That’s why money has to be released in the market. In countries where cash transactions are high, more money has to be printed. Demand for cash transactions is still high in Bangladesh. Because of this, 6 to 7 percent of GDP is out of cash.
In contrast to remittances, foreign investments, foreign currency should be kept in the central bank to increase the flow of money in the market. As a result, the printed money is released in the market. The central bank is now releasing an equivalent amount of rupees against the dollar. But it is sometimes more.
Conventional notes are becoming obsolete or perishing. About 7 percent of money is lost annually. According to the supply of notes, Tk 19 thousand crore were lost. They have to be removed and new notes issued. For this, Tk 18 to Tk 19 thousand crores are released.
New money comes more during Eid. During this time, economic activities increase. As a result, the demand also increases. On an average, new notes of Tk 20,000 to Tk 25,000 crore come into the market every Eid. As remittances increase, so does government debt. It also has to leave money.
How money comes to life: Printing money is a continuous process. This is why money is always printed. But they are not released in the market. kept in the vault of the central bank. If in the vault, money is valuable or dead or paper based notes. Asmatra lives from the vault to the market. used in transactions. Money is released into the market according to the demand of the economy. Sometimes printed money is withdrawn from the market. Tk 5,034 crore were withdrawn due to less economic transactions during Corona.
Against assets: The central bank issues money in the market against various assets. These include gold, silver, foreign currency, government bonds and other assets. As on June 30, 2021, Tk 2 lakh 25 thousand crore was in cash form. Out of this, Tk 3,143 crore against gold and silver, Tk 2,12,600 crore against foreign currency reserves, Tk 4,935 crore against government bonds, Tk 4,600 crore against local currency and Tk 4,188 crore against other assets.
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