After the fall of the Awami League government during the students' uprising, the new interim government has undertaken reforms in various sectors. However, there have been fewer steps taken to provide relief to the people by reducing the prices of goods.
According to the government agency Trading Corporation of Bangladesh (TCB), the prices of six essential commodities have increased in the two months since the new government took office, while only two have decreased.
The price of vegetables in the market is very high now. The price of eggs per dozen has risen to Tk 170, and there has been no relief in the prices of chicken and fish. Overall, the suffering of low-income people has not diminished.
To reduce inflation, Bangladesh Bank has taken steps to decrease the supply of money in the market by raising interest rates. As a result, interest rates have increased. The price of the US dollar rose and stabilised at a certain level. However, due to rising interest rates and the value of the dollar, the costs for commodity traders have increased.
Market analysts believe that the move to raise interest rates is appropriate, as it will decrease the supply of money in the market, leading to reduced demand for products and potentially lowering inflation.
However, this theory is less effective in the case of essential products, as demand for these items remains constant. The demand, supply, and prices of essential goods do not depend as heavily on the overall supply of money in the market. Specific measures are needed to lower the prices of these products.
Take eggs, for instance. Their price is influenced by production costs, demand, and supply. When people have less disposable income, the demand for eggs often increases. Therefore, initiatives should be implemented to boost the supply of eggs in order to reduce their price.
Khandkar Golam Moazzem, senior research director Centre for Policy Dialogue (CPD), told Prothom Alo that the continued high prices during the Awami League government have generated anger among people in both urban and rural areas. Instead of taking effective initiatives, the government showed indifference. He emphasised the need for reforms in the market and supply systems for daily commodities.
Finance and Planning Adviser Salehuddin Ahmed has little opportunity to give adequate attention to the Commerce Ministry after managing two major ministries. There are many challenges facing this ministry now, and these are expected to increase in the future. It is essential to appoint an adviser with sole responsibility, someone who will work outside conventional frameworks.
Prices fluctuating
Analysing the market price list from the TCB, it can be seen that, compared to 8 August, the price of coarse rice has increased by Tk 1 per kg, open soybean oil by Tk 6 per litre, palm oil by Tk 12, broiler chicken by Tk 10, sugar by Tk 3, and eggs by Tk 15 per dozen.
Conversely, the prices of onions and potatoes have decreased by Tk 5 per kg, thanks to specific government measures aimed at these two products. Initiatives were taken to increase supply in the market by reducing duties and facilitating imports.
The TCB price list does not include the prices of vegetables other than potatoes. However, the prices of various vegetables are recorded in the market price list from the Department of Agricultural Marketing. According to that list, most vegetable prices are currently higher compared to 8 August.
For example, the price of eggplants now ranges from Tk 60 to Tk 100 depending on the variety, compared to Tk 40 to Tk 80 on 8 August. Similarly, the current price of snake gourd is Tk 50 to Tk 80 per kg, up from Tk 35 to Tk 60 a couple of months ago.
After visiting the retail shops at Dhaka's Mirpur-11 kitchen market, Kalshi market, Tejgaon’s Begunbari market, and Karwan Bazar, it was observed that most vegetables are priced between Tk 60 and Tk 100 per kg. Vendors noted that the supply of vegetables is low, leading to significant price increases over the past two months.
Mansur Ali, a vegetable seller at the Mirpur-11 market, told Prothom Alo, "Every day, people ask why the price of vegetables is so high. We have no answer. People are really suffering, and our profit has also decreased."
Traders indicated that, apart from vegetables, the prices of eggs, chicken, unpackaged edible oil, and sugar have risen the most in the market over the past two months. The price of medium rice has increased by Tk 3 to 4 per kg, which is not reflected in the TCB list.
Eggs and farm-raised chickens are major sources of animal protein for middle and low-income families. A dozen eggs now costs Tk 165 to Tk 170, while two years ago, it was usually Tk 100 to Tk 110 throughout the year. Broiler chickens are priced at Tk 180 to Tk 190 per kg, which is Tk 20 less than a week ago. Two years ago, buyers could typically purchase broiler chickens for between Tk 130 and Tk 140.
Housewife Jharna Begum told Prothom Alo that the prices of daily essentials are not under control. "Everyone is selling at higher prices. Vegetables cannot be bought for less than Tk 80 to Tk 100. The prices of eggs and fish are increasing day by day. The situation is completely out of hand."
After Russia invaded Ukraine in February 2022, the country's foreign exchange reserves continued to decline, and the value of the US dollar has continued to rise. Consequently, the prices of all products began to increase.
Prices of almost all daily essentials, including rice, pulses, edible oil, sugar, eggs, fish, meat, vegetables, spices, and daily-use items like soap, toothpaste, tissue, coconut oil, baby food, and cosmetics, have risen. On the other hand, the Awami League government has gradually increased the prices of fuel oil, gas, electricity, and water, which has further raised production costs for industrial products.
The Awami League government has adopted a strategy of fixing the prices of certain goods; however, it has not been effective. For example, the fixed price of a 12 kg cylinder of liquefied petroleum gas (LPG) is fixed at Tk 1,456.
Roushan Ara, a resident of Sheorapara in the capital, bought a gas cylinder last Wednesday for Tk 1,700.
What is the new govt doing?
Bangladesh Bank Governor Ahsan H Mansoor, after taking charge last August, began implementing a strategy to deregulate interest rates in order to reduce inflation. As a result, interest rates have increased. The price of the dollar has stabilized around Tk 120, and inflation eased slightly to just under 10 per cent last month, although food inflation remains above 10 per cent. This means that while people had to spend Tk 100 to buy food in September last year, it now takes more than Tk 110.
The Bangladesh Bureau of Statistics (BBS) calculates inflation by taking into account the prices of more than 500 goods and services. However, low-income families are under pressure when the prices of some daily commodities increase, as these prices are already high. Additionally, people's wages are not increasing in line with inflation. The BBS reports that wages rose by 8 per cent in September, while inflation stands at around 10 per cent. This indicates that people's purchasing power has decreased further.
After the new government took office, the Commerce Ministry appealed to the National Board of Revenue (NBR) to reduce duties on onions, potatoes, and eggs in order to bring down prices. The NBR has reduced duties on onions and potatoes, leading to a slight decrease in their prices. However, no effective measures have been observed to lower the prices of other daily commodities.
The Ministry of Commerce has not issued an official statement on the matter. However, an official who deals with commodity prices told Prothom Alo on the condition of anonymity that the Ministry is holding regular meetings to monitor the situation. Many decisions, however, are being stalled by objections from other ministries and departments. He noted that the government is not pursuing unnecessary projects at this time, which allows for potential relief through revenue concessions. A concerted effort is needed for this.
What to be done
Prothom Alo spoke with economists, market analysts, and traders to explore ways to reduce prices. They agreed that allowing interest rates to rise is a necessary step to combat inflation, but additional measures can also be implemented.
In the short term, the government can take several actions. First, it should reduce duties on rice, sugar, edible oil, and eggs. This would create an opportunity to lower prices and increase supply. Currently, the duty on a kg of sugar is Tk 44. The Awami League government had imposed high customs duties on several commodities, including sugar, to meet revenue collection targets.
Second, the government should consider revising the dollar value used to determine customs duties. Customs currently levies a duty based on an exchange rate of Tk 120, which was Tk 118 last month. In this case, either the tariff value could be reduced, or the duty itself could be lowered.
Thirdly, India has opened up rice exports. Lowering the duty on rice would create opportunities for imports, forcing domestic rice stockists to reduce prices in the face of competition.
Fourthly, the government should consider allowing the import of eggs with reduced duties, albeit for a limited period. Facilitating imports would increase competition in the poultry feed market, thereby reducing production costs for farmers.
Fifth, reducing the price of diesel is crucial. Currently, a litre of diesel incurs a duty of Tk 21. The profit margin of the Bangladesh Petroleum Corporation (BPC) could be reduced through discounts. This would lower transportation costs, which in turn would reduce the overall cost of transporting goods.
Sixth, the supply chain needs to be reformed. Effective market surveillance requires measures to use official receipts, formalise transactions, eliminate extortion, and remove middlemen from markets.
Seventh, the market for various daily products in the country is dominated by a few companies and importers. Steps should be taken to enhance competition in this sector.
Eighth, it is crucial to ensure that data on product demand, production, and supply is credible. Without accurate calculations, effective policies cannot be implemented. The production figures provided by government agencies are often unreliable.
Retail traders also feel that a thorough review is needed to understand why prices are increasing.
Mohammad Muntaz, an egg seller at the Mirpur-11 kitchen market, questions, "Why do egg prices increase every day? How much has the cost of chicken feed risen?"
* This report, originally published in Prothom Alo print edition, has been rewritten in English by Farjana Liakat