Bangladesh Inflation Fears: 'High-Powered Money'

Dhaka, Apr 23 (PTI) A leading Bangladeshi financial think tank on Thursday feared the South Asian nation was likely to be exposed to increased inflationary pressure as the government injected "high-powered money".

Policy Research Institute (PRI) of Bangladesh issued the warning at a business leaders' conference with the think tank's chief economist Ashikur Rahman saying Prime Minister Tarique Rahman's government opted for "money printing" ignoring inflationary risks.

He said the government borrowed Taka 200 billion (USD 1,630,109,200) from Bangladesh Bank in March alone, effectively injecting the "high-powered" currency into the market.

"This is high-powered money -- essentially printed money -- which may push inflation upward," Rahman said as the key-note speaker of the conference.

Bangladesh's inflation rate was measured at 8.71 per cent in March as it dropped from a ten-month high of 9.13 per cent in February but analysts said despite this slight decline, an upward trend remained due to high food prices and energy price hikes.

Rahman said the government move came amid an ongoing global economic instability particularly triggered by the West Asia crisis, worldwide policy uncertainties, and a lack of clarity over Bangladesh's proposed LDC (Least Developed Countries) graduation while all these factors mounted extra pressures on the country's economic stability.

International Chamber of Commerce Bangladesh (ICCB) president Mahbubur Rahman, meanwhile, asked policymakers to avoid excessive money supply and unnecessary public spending and instead lay focus on streamlining systems and particularly disciplining the banking sector, even if it required bank mergers.

The ICCB president said concerns over energy supply debarred entrepreneurs and business community from making investments or expanding operations dampening investment sentiment as they were "unsure if they will have access to adequate gas and electricity".


"Stepping back from (required) reforms at this stage would be suicidal," the PRI chief economist said, urging the government to review bank resolution mechanisms and avoid creating unnecessary tensions around International Monetary Fund (IMF) programmes.

Financial analyst Khondokar Shakhawat Ali said Bangladesh currently witnessed emergence of a form of "crony capitalism", undermining the investment climate and distorting economic dynamics.

Despite growth in bank deposits, governance deficits continued to persist in the financial sector, he said.

Ali also cautioned that financing subsidies through excessive money creation would further fuel inflation, directly impacting ordinary citizens while stagnation in employment, by now emerged as an additional economic risk.

Economic analysts earlier said Bangladesh's economy in 2026 was faced with a challenging recovery with projected GDP growth between 3.9 and 5 per cent influenced by persistent inflation, weak investment, and external shocks from the crisis in the Persian Gulf causing a supply crunch.

The World Bank has projected a growth slowdown to 3.9 per cent in 2026 while the Asian Development Bank (ADB) estimated the figure to be 4 per cent.

Bangladesh saw the peak of its GDP in 2019 when the rate was 7.9 per cent while except the COVID period in 2020, the country continued to witness above 6 per cent growth from 2010 until 2023.

The analysts, however, expected a stronger remittance inflow as a positive indicator but that too was to support household consumption.