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Dhaka Tribune

Inflation to push half a million Bangladeshis into poverty

The moderate poverty rate (at $3.65) may also increase to 29.4% from 29.3% to stand at 0.84 million

Update : 04 Apr 2024, 03:29 PM

An estimated 500,000 people in Bangladesh are likely to be pushed down the poverty line in two years due to inflation, according to the World Bank's report.

The moderate poverty rate (at $3.65) may also increase to 29.4% from 29.3% to stand at 0.84 million, reports the Washington-based lender.

As consumption growth slows and population increases, almost half a million Bangladeshis are projected to fall into extreme poverty (at $2.15) between FY23 and FY24, read the Macro Poverty Outlook (MPO) 2023.

On a broader spectrum of macroeconomic conditions the WB said that elevated inflation will weigh on consumption, while private investment will remain constrained by foreign-exchange rationing.

The inflationary pressure is maintaining a higher trajectory over the last few months as point-to-point inflation has not been falling even below the 9% rate.

According to a Bangladesh Bureau of Statistics (BBS) report, the country's poverty rate declined to 18.7% and extreme poverty to 5.6% in 2022.

The BBS's 2016 Household Income and Expenditure Survey (HIES) showed the poverty rate was 24.3% and the extreme poverty rate 12.9%.

BB’s inflation control measures

Inflation staying persistently high at over 9%  poses a concern and reducing it to a tolerable level may necessitate continued monetary tightening for an extended period, said one of Bangladesh Bank's (BB) quarterly publications on Wednesday.

In "Bangladesh Bank Quarterly" for the October-December period 2023, the central bank said it has placed the topmost priority on the containment of inflation.

On January 21, this year, the Bangladesh Bank raised the policy interest rate again by 25 basis points to 8% to curb inflation and anchor inflation expectations while ensuring adequate funding to productive sectors of the economy to support desired growth.

The central bank will continue monetary tightening in the rest of the quarters of FY24 until inflation reaches the desired level.

However, the inflation trajectory depends crucially on the extent of transmission of Bangladesh Bank's contractionary monetary policy and the government's fiscal policy stance, the World Bank on Tuesday said in its Bangladesh Development Update.

"The central bank maintained its restrictive monetary stance and adopted a unified exchange rate policy to manage inflationary pressure. The government is also taking steps to remove supply constraints by addressing issues such as syndication, hoarding, and other unethical practices."

The Bangladesh Bank said it was crucial to recognize potential challenges on the horizon, such as escalating geopolitical tensions and a possible slowdown in economic activities in the trading partners of Bangladesh.

"In light of these factors, maintaining vigilance and engaging in strategic planning are imperative for navigating potential fluctuations in the economic landscape."

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