How printing money can save the economy of Bangladesh

Date:

Post View:

How printing money can save the economy of Bangladesh

The US, the Central Banks of Europe, Japan are printing money to bring economies back to life.

Major global economies are responding to the Covid-19 induced recession by adopting unorthodox stimulus measures, including printing money.

The US, the European Central Bank, Japan, and even developing emerging economies such as Turkey and Indonesia are printing money to bring economies back to life. So must Bangladesh. Here’s what this incentives means, and what Bangladesh can do.

 What is Printing Money?

1] CENTRAL BANK DIRECTLY BUYS GOVT DEBT/BONDS

This injects cash into economy Akin to printing new money, though done electronically

 2] CENTRAL BANK BUYS BONDS FROM CORPORATES, LENDERS

Seller is able to get rid of illiquid assets and deploy funds elsewhere

What are Major Economies Doing?

1] US Fed Reserve used it extensively to counter 2008 crisis and same template in use for Covid-19 crisis

 2] European Central Bank has removed the limit on bonds it can buy from any single Euro-zone country

 3] Bank of England Ready to temporarily lend money to govt, if needed

 4] Bank of Japan will buy unlimited amount of govt bonds

 What Did Bangladesh Do Earlier?

Debt monetisation by Bangladesh Bank (BB) was the norm in 1985s, and up to late 1990s Govt deficits were monetised through ad hoc treasury bills

 What Bangladesh Can Do Now?

1] Economy needs massive fiscal stimulus. Leading economist estimates 9-10% of GDP must be spent. This translates into Tk 2-5 lakh crore Budgeted borrowing in FY20 is Rs 50 crore

2] Market cannot support this borrowing

3] Interest rates will rise sharply

4] Pvt sector/other borrowers will be denied credit

5] High interest rates/lack of credit will kill economic activity

6] So, only BB can provide such funds by printing money

 Return much higher than risk

Bmirrorhttps://bmirror.net/
businessmirror20@gmail.com

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Share post:

Subscribe

spot_img

Popular

More like this
Related

T10 cricket festival of youth in Magura Government Polytechnic Institute

Faruk Ahmed, Magura: With the aim of building a...

Pakistan FM likely to visit Dhaka in April: Foreign Adviser

MM Rahmatullah: Md Touhid Hossain, Foreign Affairs Adviser on...

Five sentenced to life in Naogaon murder case

AK Sazu, Naogaon: A court on Thursday sentenced five...

Reserves increased again to $20 billion

The country's foreign exchange reserves have been fluctuating around...