Continued borrowing from central bank to create inflationary pressure: CPD

The Centre for Policy Dialogue (CPD) today said the government's continued borrowing from the central bank will further deteriorate the macroeconomic discipline and create an inflationary pressure in the economy already battered by sustained high inflation.

"Continuing borrowing from the central bank will surely create a higher flow of money supply, and hence, create inflationary pressure," said CPD Executive Director Fahmida Khatun at a media briefing.

The think-tank organised the briefing at its office to share its review on the state of Bangladesh economy.

The CPD said the government borrowed Tk 54,501 crore from the Bangladesh Bank until February this fiscal year.

According to media reports said the amount of borrowing from the central bank rose to Tk 74,393 crore until April, the CPD said.

The borrowing from the banking watchdog may have created a gross new money to the tune of Tk 383,124 crore, but a comparison with global practice reveals Bangladesh has surpassed all the thresholds by a considerable margin, the CPD executive director said.

"A cross-country literature survey reveals that many countries have put legislative limits."

The government should prioritise mobilising foreign-funded budgetary support under negotiation, she said.

The CPD said the persistent inflation crisis remains a major pressure point for managing the Bangladesh economy in the current context.

The organisation said the prices of fuel may be cut by about Tk 5-10 per litre to reduce the pressure of high prices.

It said Bangladesh Petroleum Corporation (BPC), the sole agency to import and market petroleum, may make a profit of Tk 5 per litre from selling diesel and about Tk 13 per litre from octane at the current prices.

So, there may be an opportunity to reduce petroleum prices between Tk 5-10 each litre, it added.

The CPD said BPC's total profit in the last seven years--from fiscal year 2015-16 to fiscal year 2021-22--was about Tk 43,804 crore.

After paying Tk 7,727 crore as income tax, BPC's net profit was Tk 36,074 crore, said the CPD.

Being a monopoly and state-owned enterprise, enjoying windfall gains by penalising the citizens of the country cannot be justified, it said.