With inflation exceeding 9.74% in Bangladesh, essential commodities like food and fuel have become increasingly unaffordable, especially for low-income earners.
Economists participating in a Bangladesh Economic Association’s (BEA) session on Saturday attributed the price hikes to a combination of factors, including policy failures by the government and unethical pricing practices by businesses.
An integrated effort by all stakeholders is needed to combat unethical and exorbitant price hikes, said Dr Foyasal Khan, executive director of Bangladesh Institute of Policy Studies (BIPS).
He said price surge in Bangladesh could not be explained by economic factors alone, rather a surge in excessive and unreasonable prices are the result of moral crisis among economic agents and lack of upholding ethics in business.
According to the findings of his survey, 97% respondents feel that traders deliberately raise prices during Ramadan.
A study, led by additional director of Bangladesh Bank Omor Faruq, has uncovered a strong positive correlation between money supply and inflation, emphasizing the monetary policy's critical role in managing inflation.
The toll on households
The rising costs have forced many Bangladeshis to make difficult choices. People on low incomes are cutting back on savings and essential expenditures, according to economists. Some are even depleting their deposits and assets, or in extreme cases, leaving cities to return to villages where they perceive the cost of living to be lower.
“Even many have been leaving cities and going back to villages for this reason,” they said.
"People ranging from poor to the middle class have cut back on consumption," said Prof M Azizur Rahman, chairman of economics department at Notre Dame University.
He presented a paper on the impact of inflation and price hike in 2022, 2023 and beyond on different income groups in Bangladesh and measures taken by them to cope with the crisis.
Rahman said higher middle-income groups have started “dissaving” by halting new savings and encashing old savings and deposits to cope with the situation.
Controlling the problem
Economists also presented research on potential solutions. A study by Bangladesh Bank's Omor Faruq found a strong correlation between money supply and inflation, emphasizing the importance of effective monetary policy in managing price increases.
Another study, led by Md Yousuf of Bangladesh Bank and Professor Mohammad Shafiur Rahman Chowdhury of Chittagong University, identified a link between global supply chain pressures and domestic inflation. Their research suggests that policymakers need to consider these global factors when formulating policies to control inflation.
These studies underscore the multifaceted nature of inflation in Bangladesh. Addressing the issue will require a multi-pronged approach that tackles policy failures, combats unethical pricing practices, and considers the impact of global economic trends.
