Kazi Zahidul Hasan :
The government of Bangladesh on August 6 hiked fuel prices more than 51 per cent – the steepest rise in the country’s history. The prices of essential goods are surging upwards as a result of the government move.
Prices of rice, a key staple, increased by Tk 4-Tk 6 (per kg), flour by Tk 3-Tk 4 (per kg), broiler chicken by Tk 25-Tk 30 (per kg), egg by Tk 12-Tk 13 (four pieces), loose soybean oil by Tk 8 -Tk 12 (per litre), lentil by Tk 4-Tk 5 (per kg) and onions by Tk 15-Tk 20 (per kg) in the markets after the government hiked fuel prices.
Market insiders attributed a higher transport cost to the spiraling food and commodity prices in local markets.
They said goods transport fare has gone up to 40-50 per cent due to hike in diesel prices.
“Rising commodity prices have intensified miseries of Bangladeshis,” said Economist Dr Ahsan H. Mansur, adding, “High prices have raised serious concerns about rising levels of food insecurity, poverty, and economic and social instability.”
He pointed out that increased costs of commodities will push domestic inflation even higher in the months to come, hitting double digit. “A high inflation can potentially slow the GDP growth.”
“Inflation in Bangladesh hit 7.6 per cent as of June 2022, highest in nine years, mainly driven by a combination of high domestic and global food and commodity prices and a depreciating exchange rate of local currency,” cited Dr Mansur, a former Economist of International Monetary Fund (IMF).
He mentioned not only Bangladesh, many countries have already affected by price increases across a range of commodities including in fertilizers, edible oils, and maize, as well as oil, natural gas and other energy products, following the Russia-Ukraine war. “Such a development also fuels inflationary pressure on the economies of developed and developing nations, including Bangladesh” he noted.
Dr Mansur, also the Chairman of BRAC Bank, also said that inflation is the ‘silent killer’ as it erodes purchasing power of the people, squeezes household expenditure and eats up savings. “People in Bangladesh are struggling to make end meets as a result of soaring inflation,” he added.
Dr Zahid Hussain, a former lead economist at the World Bank’s Dhaka Office, said, higher fuel prices that raise market prices for many consumer goods and services will negatively affect household consumption. “The consumption is expected to decline for households towards the lower end of the income distribution, leading to increased inequality and greater poverty.”
He further said the decline in consumption ultimately leave adverse impact on economy.
When asked, Dr Zahid Hussain said, “Inflationary pressures are likely to persist in Bangladesh as a result of the surge in oil prices. It was reported that the government is planning to raise electricity tariff afresh and in this case inflation would go up again depending on how much the government intervenes to cushion households from the costs.”
Besides, low-income families are struggling to buy food and other commodities amid soaring commodity prices.
“I am facing serious hardship to finance our family expenditure due to soaring prices of daily necessities,” said Jamal Hossain, who runs a tea stall at Tukituki in the capital.
He said prices of everything went up following Covid-19 pandemic. Now, fuel price hike sends a shockwave in the market, further raising prices of food and commodities. “Such a price hike only intensifies miseries of people like us. But the government seems reluctant to save us from the hardship.”
Shahana Islam, a resident of capital’s Dhanmondi area, said, “Right now, I am not able to maintain my family with the monthly budget that I spent last year. This year, the money is running out before the end of the month because of soaring commodity prices. Last year, I bought rice at the rate of Tk 56 per kg, now it cost Tk 78-Tk 80 for the same quantity of rice. The house rent increased by Tk 1,000, the cost of travel also increased, but my income remains same.”
“To cope with increasing prices of daily necessities, I have to cut monthly food bill and spending on outing and treatment,” she added.
S.M. Nazer Hossain, Vice-President of the Consumers Association of Bangladesh (CAB), said, soaring commodity prices imposes devastation impact on poor and low middle-income people. They are now struggling to survive.
“Fuel price hike pushes up prices of daily necessities and it intensifies sufferings of the common people. The government totally ignored public interest while fixing fuel prices record high. The number of poor people will increase in the country amid spiraling inflation. It could be avoided if the government refrains from fuel price hike.”
Inflation scenario in Bangladesh
Inflation is the difference in the current market price of food and commodities, clothing, housing, services etc. compared to the previous year or month or a specific period of time.
According to the Bangladesh Bureau of Statistics (BBS), the average inflation in Bangladesh stood at 6.15 per cent at the end of FY22.
Inflation in Bangladesh was 5.86 per cent in January, 6.17 per cent in February, 6.22 per cent in March, 6.29 per cent in April and 7.42 per cent in May.
Bangladesh witnessed a nine-year high of 7.56 per cent inflation rate in June, the last month of FY22, amid soaring prices of food and other daily commodities.
However, economists feel that the actual inflation rate in the country is higher than the BBS figure.
Bangladesh currently calculates inflation using the 2005-2006 fiscal year as the base year.
“The government can apply fiscal and monetary tools to fight inflation. Besides, stringent market monitoring to curb unusual price hike of essential goods could be effective to control prices of daily necessities and thereby, it can tame inflation,” said Dr Mansur, adding, “Hike in policy rate by the central bank may also be a useful tool in controlling inflation.”
He mentioned that central banks around the world have commenced hiking policy rates in order to contain the inflation. Bangladesh Bank (BB) in its latest monetary policy raised the policy rate also known as repo rate to 5.5 percent from 5 per cent. “It can opt for further hike in repo rate to check inflationary pressure on economy,” he added.
