Although Bangladesh Bank and various quarters of the government have been giving hope of an inflation decrease, inflation cannot be reined in despite various measures.
The overall rate of inflation is nearing double digits. Food inflation already hit the double digits quite some time back.
People's purchasing power has taken a nosedive and fixed income persons are floundering under the everyday cost of living.
Over the past 14 months, inflation has been over 9 per cent. Yesterday, Monday, the state-run Bangladesh Bureau of Statistics (BBS) published the latest update on inflation.
The report stated that in May inflation stood at 9.89 per cent. In April it was 9.74 per cent. That means the product that you would pay Tk 100 for in May last year, cost you Tk 109.89 in May this year.
With the increase in inflation, people are struggling. A government employee of the 15th grade wage bracket, was shopping at Karwan Bazar yesterday, Monday.
When asked about the prices, he told Prothom Alo, "The manner in which the prices are rising and the value of taka falling, taka seems to be a mere 'tejpata' (bay leaf). If you take inflation into consideration, my salary is decreasing very month."
If people's income increases in comparison to the increase in commodity prices, then people don't suffer that much. In May 2022, inflation exceeded the rate of national wage increase. In other words, the increase in people's income is lower than inflation. According to BBS, the wage increase rate in April was 7.85 per cent. In May inflation hit 9.89 per cent.
Under inflationary pressure, many are dipping into their savings. Some are withdrawing funds from their fixed deposits, some are withdrawing their investment in savings certificates before these have matured. Resident of Dilu Road in the capital, Hazera Sultana, told Prothom Alo on Monday that she had invested 500,000 taka in savings certificates. It was a struggle to run the family due to inflation and so she encashed her certificates before they matured.
Food inflation increases too
According the BBS update published yesterday, Monday, food inflation was 10.76 per cent in May which has been 10.22 per cent in April. Non-food inflation has decreased to an extent. The 9.34 per cent in April went down to 9.19 per cent in April.
However, the food inflation rate seems to be higher that the figures put forward by BBS. At the book launch of 'Stabilising the macro-economy of Bangladesh' stability on 9 May, the director general of Bangladesh Institute of Development Studies (BIDS), Binayak Sen, said given the increase the prices of fish and poultry products, food inflation is now 15 per cent for the poor. He was speaking on the basis of the BIDS survey.
Steps to reduce inflation
Economists and researchers for the past few years have been calling for an increase in interest on bank loans in order to bring inflation under control. Bangladesh Bank paid no heed. However, on 17 January this year, Bangladesh Bank adopted a contractionary monetary policy.
In order to control inflation, Bangladesh Bank has slightly increased policy interest rate to 8.5 per cent. The interest rate has been left to the market. Imports are being controlled too. However, these measures have not brought inflation under control.
In a meeting with the Economic Reporters Forum (ERF) on 7 November 2023, the government of Bangladesh Bank, Abdur Rouf Talukdar, said, "Inflation will be brought down to 8 per cent by December and 6.5 per cent by June."
Sri Lanka, hit hard by economic woes, has lowered its inflation. In October 2022 Sri Lanka's inflation was 70 per cent. In February this year it subsided to 5.9 per cent. India has controlled its inflation too. Only Bangladesh is failing to do so.
When inflation was low, the taka was not devaluated against the dollar. It has been now at a time when the country is experiencing high inflation.Selim Raihan, executive director, SANEM
Executive director of the South Asian Network on Economic Modeling (SANEM), Selim Raihan, speaking to Prothom Alo, said that perhaps the government is now considering inflation control to be an important problem. If it has considered it to be an important problem, it would do more than the measures that it has taken so far. Monetary policy alone will not control inflation. Integrated efforts, including revenue policy and market management, are required. That is not visible.
Citing an example of not taking steps in due time, Selim Raihan said that when inflation was low, the taka was not devaluated against the dollar. It has been now at a time when the country is experiencing high inflation. The price of power has been increased. Dhaka WASA has hiked the price of water. The price of oil has been hiked too. Overall, lack of policy coordination is also majorly responsible for the inflation.