Broad money stands at Tk 23.91 trillion in May

Broad money (M2) recorded its strongest monthly expansion in more than a year in May, buoyed by higher government borrowing, a rebound in domestic credit, rising foreign exchange reserves and an expanded reserve money base, although private sector credit demand remained subdued.

According to the latest Bangladesh Bank (BB) data, broad money increased by Tk 528.66 billion, or 2.26 per cent, to Tk 23.91 trillion in May from Tk 23.38 trillion in April.

The surge marked a sharp turnaround from April, when M2 had grown by only Tk 26.02 billion, or 0.11 per cent, highlighting a significant improvement in liquidity conditions within a month.


On a year-on-year basis, broad money expanded by 12.45 per cent, adding Tk 2.647 trillion, compared with 7.84 per cent growth in the same month last year. 

The expansion was supported by a 9.54 per cent rise in net domestic assets and a 31.97 per cent increase in net foreign assets, indicating that both domestic and external sources added liquidity.

Domestic credit recovered in May, increasing by Tk 94.73 billion, or 0.39 per cent, to Tk 24.549 trillion after declining by Tk 181.48 billion, or 0.74 per cent, in April. 

The turnaround in domestic credit largely explains why broad money accelerated so sharply in May after remaining almost unchanged in April.

The recovery, however, was driven mainly by the government rather than businesses. Net credit to the government rose 24.61 per cent year-on-year, more than double the 10.78 per cent growth recorded a year earlier. 

In contrast, private sector credit grew by only 4.98 per cent, slowing from 7.17 per cent a year ago, reflecting subdued business borrowing amid cautious investment and still-tight lending conditions.

Reserve money,  the monetary base from which banks create deposits and loans, stood at Tk 4.855 trillion in May, up 17.51 per cent from June 2025. 

By comparison, reserve money had contracted by 3.58 percent a year earlier. The larger reserve money base gave banks more funds to support deposit creation and lending.

The improvement in Bangladesh's foreign exchange reserves also played an important role. Higher net foreign assets injected additional liquidity into the banking system as the central bank accumulated foreign currency, helping offset the weakness in private credit demand.

The April and May figures show a clear shift in liquidity conditions. In April, domestic credit shrank and broad money barely increased despite steady reserve money. In May, domestic credit turned positive, reserve money stayed elevated and foreign assets continued to rise, allowing broad money to record a strong monthly expansion.

A senior BB official said the increase in broad money reflected stronger liquidity conditions supported by higher reserve money and improving foreign asset accumulation, while domestic credit recovered from the previous month's decline.

Another central bank official said government borrowing remained the main driver of domestic credit growth in May. However, the official said the slow growth in private sector credit indicated that businesses were still borrowing cautiously despite improved liquidity in the banking sector The BB official said private sector credit remained subdued despite the increase in overall liquidity, indicating that businesses were still borrowing cautiously due to weak investment demand and relatively high financing costs.