An increase in government borrowing in recent months has helped Bangladesh Bank's reserve money (RM) grow by 5.27% as of May this calendar year.
Economists and bankers, however, believe that the net domestic asset (NDA) of the reserve money or RM grows largely with gains from government borrowing of high-powered money or printed money which contributes to stoking inflation.
On the other side of the RM is foreign net asset (NFA), which contracts mainly for lower inflows of foreign currencies and Bangladesh Bank sending dollars into forex-scant commercial banks.
After negative growth in FY22, the RM with the central bank registered a positive growth of over 5% year on year at the end of May 2023 mainly because of a significant rise in net domestic asset (NDA), officials said.
They said a fourfold rise in the NDA came mainly from gains from record borrowing by the government from the central bank over the last one year to make up for budget-financing shortfalls.
According to the latest statistics of the central bank, the RM reached Tk342,000 crore until May 2023, up 5.27% from corresponding period when the size of reserve money was Tk331,000 crore.
In FY22, the volume of RM declined slightly to Tk347,000 crore from Tk348,000 crore recorded in the previous FY21, the official data showed.
According to the data, the NDA rose to Tk82,400 crore at the end of April 2023, 3.88 times higher from Tk21,200 crore recorded a year before.
A BB official said that the reserve money having registered 5.27% growth was insignificant compared to the target level of 14% at the end of June 2023, due to substantial decrease in NFA.