In May 2025 broad money (M2) supply expanded by 7.84 per cent year on year basis, falling short of Bangladesh Bank's (BB) projected growth by 8.40 per cent for June and 8.53 percent for May 2024,
This signals a marked slowdown in liquidity growth. Latest BB projections for June 2025 indicate M2 growth will register just around 7.0 per cent-well below the projected path-chiefly due to weaker net foreign asset growth than anticipated.
Broad money reflects total liquidity in the economy, combining currency in circulation and bank deposits that can be cashed quickly. Its weaker or slow expansion indicates sluggish transmission of monetary policy into lending and investment.
Domestic credit growth also decelerated sharply to 7.86 per cent in May 2025 compared with 11.66 per cent a year earlier.
Public sector borrowing rose by 10.23 percent and private sector credit by 7.17 per cent, both illustrating slower demand in the economy.
Over the broader fiscal year to May FY25, domestic credit rose just 6.83 percent-down from 8.75 per cent a year earlier-further underperforming treasury and private expectations.
Money supply details show net foreign assets increased modestly, but net domestic assets-the dominant component-slowed to roughly 8.38 percent growth, a sharp deceleration from over twelve percent the prior year.
Deposits and currency outside banks recorded moderate increases-banking deposits up 7.73 per cent and currency outside banks about 8.54 per cent in May, slower than in previous year .
Despite substantial remittance inflows supporting net foreign assets, the slowdown in domestic credit suggests private sector borrowing remains constrained, and public sector funding is not rising as fast as earlier expected.
A senior BB official said, "We remain vigilant. Broad money growth running below target and decelerating domestic credit signal caution. We will continue our current monetary policy stance to contain inflationary risk and maintain stability. The monetary policy stance remains contractionary to curb excess liquidity and inflation pressures".
The central bank had forecast domestic credit growth reaching double digits by June FY25, but actual performance is falling well below those projections. Reserve money growth is also lagging projections-forecast at 1 percent, recorded at negative 0.1 percent in June-further tightening monetary conditions.
The money multiplier rose from around 4.92 in June 2024 to 5.28 by June 2025, reflecting improved financial system leverage but limited credit absorption given stalling liquidity.
Overall, the broader financial snapshot shows declining real GDP growth, rising inflation, and political uncertainty undermining investor confidence.
In this context, the muted expansion of M2, combined with slowing domestic credit, signals muted future economic momentum. The Bangladesh Bank appears firmly committed to tightening policy levers, resisting any premature loosening even as broader economic growth targets remain moderate.
Authoritative data delivers a clear message: monetary growth is slowing, credit expansion is underperforming, and Bangladesh Bank will maintain a commanding contractionary posture until broad money, credit, and inflation dynamics align with macroeconomic stability goals.
