Debate over printing money amid inflation woes
FE REPORT | Monday, 19 February 2024
Business leaders and economists have expressed concern about the Bangladesh Bank's move to print money to meet government needs, arguing that it contradicts its efforts to control inflation through interest rate hikes.
However, the Bangladesh Bank's Chief Economist Habibur Rahman disputed these claims, stating that the bank is not, in fact, printing money.
The debate over printing new notes for the government took place at a seminar, hosted by the Dhaka Chamber of Commerce & Industry, in Dhaka on Sunday.
The seminar also identified extortion on roads as a "major driver" of inflation.
The central bank, meanwhile, reiterated its commitment to maintaining a contractionary monetary policy until inflation becomes more manageable.
"It is contradictory to raise interest rates to tame inflation while simultaneously repaying debt by printing money," said a businessman at the event.
Speaking on the panel, Shams Mahmud, former president of the Dhaka chamber, also pointed to inconsistencies in government policies as a key barrier to attracting investment in the country.
He alleged that loan defaulters receive preferential treatment, while legitimate businesses face harassment and are denied benefits.
Shams Mahmud urged the government to address these issues to create a healthy business environment.
Responding to the issue of printing money, Bangladesh Bank Chief Economist Mr Rahman dismissed the claims as "populist" and "sweeping comments".
He said the central bank's issuance of money has actually decreased by 2.03 per cent, indicating that they have received more money than they have issued.
He noted that printing money is a routine job of the Bangladesh Bank and that they have not printed any new money in the past six months.
Mr Rahman assured the audience that the central bank has taken steps to ease inflationary pressures and is committed to maintaining a contractionary policy until inflation falls to 6 per cent.
On a separate note, Dr Mohammad Yunus, research director at the Bangladesh Institute of Development Studies (BIDS), said extortion in the retail market can sometimes be a key driver of inflation.