What is money supply?
Money supply is the total amount of money in a country’s economy. Not just printed notes: money in bank accounts counts too, because you use it to shop, pay bills and send to others. In practice most of a country’s money exists not as notes but as deposits on banks’ books.
The central bank watches this amount because when money grows much faster than goods, each taka is worth less, which means more inflation. But if money grows too little, businesses and households can run short of the money they need to keep spending.
Rony gets his Tk 40,000 salary in his bank account at the start of the month. He withdraws Tk 10,000 for his wallet and leaves the rest in the account. Both are part of the money supply. The withdrawal did not change the total, only its form: from bank deposit to cash in hand. The numbers are only an example.
Why it matters to an investor
- For an early hint about inflation: when money grows much faster than the economy for a long time, price pressure usually builds.
- To sense where interest rates are heading: when money grows too fast, the central bank usually tightens, and rates can rise.
- To read monetary policy news: Bangladesh Bank’s policy statements give targets for broad money and private-sector credit growth. Being able to read them makes the news much clearer.
- To see the cost of holding cash: cash earns no interest, so in times of inflation its buying power falls most directly.
Different measures of money
Money is measured at a few “levels”, from small to large. The one in the news most often is broad money (M2). In Bangladesh Bank’s data it is cash outside banks plus demand and time deposits held in banks, all together.
- Reserve money: the notes and coins the central bank has issued plus banks’ reserves held at the central bank. It is the “base” on which the rest of the money is built.
- Narrow money (M1): cash outside banks plus demand deposits, that is, money that can be spent straight away.
- Broad money (M2): M1 plus time deposits, such as FDRs and savings deposits.
How much money in Bangladesh
At the end of June 2026, broad money in Bangladesh was about Tk 24.16 lakh crore, about 11.1% more than a year earlier. The year before, in June 2025, that growth had been about 6.95%. At the same time, cash outside banks was about Tk 3.36 lakh crore, roughly one-seventh of all money; the rest was bank deposits.
These figures change every month. Bangladesh Bank publishes the latest numbers regularly in its monetary survey and other reports.
How the amount of money grows
- When banks lend: the loan lands in someone’s account as a new deposit, so when bank lending grows, the amount of money usually grows too.
- When the government borrows from banks: borrowing from the central bank in particular puts new money into the economy.
- When dollars come in from abroad: when remittance or export dollars are converted into taka, money inside the country grows.
- In the other direction, when loans are repaid or the central bank draws money out of the market, the amount shrinks.
Worked example
- Say the amount of money in a country grows by 12% in a year.
- In the same year, the goods and services the country produces, that is real GDP, grow by 5%.
- If people spend money as quickly as before, much of the extra money ends up in prices: roughly 12% − 5% = 7% of pressure on prices. The numbers are only an example.
Result: when money grows faster than goods, prices come under pressure. In reality the link is not this simple, because how fast people spend money also changes, and the exchange rate, fuel prices and more also affect inflation.
Common mistakes
- Thinking money supply means only printed notes. Most of a country’s money is actually bank deposits.
- Drawing big conclusions from one month’s figure. Demand for cash rises and falls temporarily around times like Eid or the end of the year.
- Assuming that when money grows, prices rise at the same rate right away. The effect comes with a delay, and many other factors are at work.
- Confusing the amount of money with its value: more money in the country does not mean more buying power for your money.
Money supply is the country’s total money, cash plus bank deposits; when it grows much faster than goods, inflation pressure builds.