For Abdur Rahim, a company executive, and his wife Roksana Rahman, an employee at a chain shop had to cut back their different expenditures for survival following the increase in cost of living.
Mrs Rahman said that the lion’s share of their income is spent to meet house rent and transportation costs. Meanwhile, cost of living has outstripped inflation, revealed a Consumers Association of Bangladesh (CAB) study.
About 60-70 percent of the monthly income of a middle class family is being spent to cover house rent and transportation, CAB Study revealed. It is having negative impact on food and education, as people are compelled to reduce their other expenditures, it said.
The reasons have been attributed to the effect of fuel price increases, and the rising price of housing and food and other essentials.
“The high cost of living is pushing families into poverty,” according to former adviser to caretaker government Hafizuddin Khan. “Life has become difficult for lower income people. Keeping the price of essentials within the reach of the common man was one of the election pledges of AL government. The government appears to be indifferent to the plight of the middle class,” he added.
Although the government tried to keep the per kilometer bus fare under control, commuters are unable to travel at government fixed rates. Taxi and CNG auto-rickshaws ignore their metres while rickshaw fare has also gone up. House rent in Dhaka rose by almost 16 percent on average in 2011, CAB study said.
President of Consumers Association of Bangladesh (CAB) Kazi Faruk told the media : “Policymakers don’t seem to understand how difficult life has become for people, especially the middle class. Their standard of living is going down.”
The price of the imported food items is related that of the international market and it is almost unaffordable.
A monopolised market, hoarding of food grains with the intention to sell them at higher prices later, the presence of multiple middle-men between farmer and retail consumer and the culture of extortion at different points from production to sales are some of the reasons of food price hike, they said. These reasons of price hike can be controlled by the government with a proper regulatory regime, some economists said.
The Open Market Sales (OMS) mechanism has an important role to play in easing the burden on lower and lower middle class families. Because of the function of OMS poor people still can buy rice. But consumers belonging to middle income groups face serious problems to adjust with the cost of living, they said.
Much of the fiscal imbalance can be attributed to the government’s decision of relying on rental and quick rental power plants to ease power shortage. The plan has stumbled, with most of the plants facing mounting financial and technical difficulties.
Even though about a dozen rental power plants are operational now, load shedding in the country is still a daily experience as most power plants are running at less than 50 per cent of their capacity.
To feed the rental power plants, the country’s fuel imports have almost doubled to 70 lakh tonnes from about 35 lakh tonnes. Coupled with rising import of capital machinery, this is putting pressure on the balance of payment and leading to an outflow of foreign currency, they said.
They are worried about the government’s increased expenditure in buying electricity at exorbitant rates from rental power plants along with the higher fuel import bill. One economist at Bangladesh Institute of Development Studies (BIDS) said: “Due to these plants the government is being forced to increase subsidies on oil imports. As a result, it has created problems on domestic fronts.”
To cope, the government had to increase the tariff on fuel and electricity. This in turn feeds further inflation and higher costs of living, they said.
The rise in petroleum prices has had a knock-on effect on the prices of essentials as the transportation costs for goods have increased significantly. It has also exposed the poor disproportionately to the effects of inflation.
Inflation is the worst tool of exploitation because farmers and workers in the unorganised sector cannot bargain for higher remuneration when cost of living goes up, unlike organised sector’s employees who get some protection by way of inflation-linked wage hikes, some economists said.
The reliance on rental and quick rental power plants has forced the government to give subsidies on both power purchase and the import of fuel oil, they said adding the rate of capital formation in the country, an indicator of investment for the future capacity and job creation, has slowed down in the recent years.
