Explain the role of Central Bank as Governments’ agent and advisor.

Question :Explain the role of Central Bank as Governments’ agent and advisor.

The correct answer is -Central Bank plays a vital role as the government’s agent and advisor in a country’s economy. Some of the key roles of Central Bank in this regard are:

1. As the Government’s Agent: The Central Bank acts as an agent of the government in carrying out various monetary and fiscal policies. It performs various activities on behalf of the government, such as managing public debt, managing foreign exchange reserves, and executing the government’s budgetary policies. The Central Bank also manages the government’s accounts and conducts auctions of government securities.

2. Lender of Last Resort: Central Bank acts as a lender of last resort in case of a financial crisis. It provides liquidity to the banks and financial institutions to ensure financial stability in the economy.

3. Advisor to the Government: Central Bank acts as an advisor to the government on various economic matters such as inflation control, fiscal policy, monetary policy, and exchange rate management. It provides expert advice and guidance to the government on these matters, helping them to make informed decisions that will benefit the economy.

4. Regulator and Supervisor: Central Bank acts as a regulator and supervisor of the banking and financial sector. It ensures that the financial sector operates smoothly and in compliance with the rules and regulations. It also regulates the flow of credit and money supply in the economy to maintain price stability and control inflation.

In summary, the Central Bank serves as an essential institution in a country’s economy, acting as the government’s agent and advisor, lender of last resort, regulator, and supervisor of the banking and financial sector.