The primary role of a central bank is to ensure monetary and financial stability within an economy. It achieves this through several key functions:

Monetary Policy Control—Central banks regulate the money supply and interest rates to control inflation, stabilise currency value, and promote economic growth. Tools like open market operations, reserve requirements, and discount rates help influence borrowing and spending.

Currency Issuance & Management – As the sole authority for issuing legal tender, the central bank ensures sufficient liquidity while preventing excessive money printing that could lead to hyperinflation.

Banker to the Government – It manages government accounts, facilitates public debt issuance, and advises on fiscal policies.

Lender of Last Resort – During financial crises, the central bank provides emergency liquidity to banks to prevent systemic collapses.

Regulator of Financial Systems – It supervises commercial banks, ensuring compliance with financial regulations to maintain trust in the banking sector.

Foreign Exchange & Reserve Management – Central banks stabilise exchange rates and hold foreign reserves to safeguard against economic shocks.

By balancing these roles, a central bank fosters sustainable economic growth, controls inflation, and mitigates financial risks, ensuring long-term stability.