A dozen eggs now costs more in Dhaka than Dayton in the USA, or Cyberjaya in Malaysia but the monthly average earnings of employees of Bangladesh are much lower than these countries, found the Centre for Policy Dialogue (CPD).
They also found prices of rice, edible oil, egg, beef and sugar increased significantly faster than the international prices. A litre of milk in Dhaka is now more expensive than a litre of milk in Ostrava, the Czech Republic, or Spain.
Towfiqul Islam Khan, senior research fellow of the CPD, said the prices of essentials are higher in Bangladesh compared to the global market due to, may be, manipulation and the lack of efficiency.“The government should look into this.”
The high prices of essential commodities is having a severe impact on the lower and middle class, whose purchasing capacity has already taken a big hit due to the Covid-19 pandemic.
CPD presented their findings at “Changing Global Scenario and Bangladesh Economy: What Should Be the Policy Stance?” at their office on Sunday.
According to the think tank, food inflation appeared to be hovering around 5.3% during the October'21– January'22 period, but the market reality was very different.
Inflation prices on many products have gone up from 6% to 15%, 20% and 30% and the sufferings of people are undermined by the official inflation statistics, they further said.
Fahmida Khatun, executive director of the CPD, during her keynote presentation at the briefing, questioned how it was possible that inflation of food remained stable amid the skyrocketing of the prices of the essentials.
The pressure on low-income people is mounting and non-food inflation has also risen sharply, she also said.
The average per capita income in Bangladesh has increased by 7.8%. But from 2010 to 2016, the real per capita income has increased by only 0.16%, Khatun also said.
Moreover, due to the increase in food expenditure, income decreased by 53% to 46% during that period, the CPD senior economist also said.
So, even though income has increased, people's purchasing power has lessened due to the decline in the actual income.
Khatun also said that the struggle of the poor and low-income group that began with the outbreak of Covid-19 in early 2020 was now worsened by the unabated rise in the prices of essentials.
These people are still grappling with their limited budgets as the pressure of price hikes continues to mount, she also observed.
Comparison
She also said during her presentation that In Bangladesh, there is a tendency to blame external factors for high prices even if certain commodities do not have any connections with the global demand.
The presentation also mentioned that the prices of rice, edible oil, beef, sugar, egg and onion have risen more in Bangladesh than that of the international markets.
Also, considering the prices of three types of rice in the country (Miniket, Paijam and coarse), the rice market is much higher than that of Vietnam and Thailand.
But the hike in the international market is not the only reason as the price of cigarettes is much lower in the country than the international market.
The price of a pack of 20 cigarettes (Marlboro) is Tk301 in Dhaka, which is Tk2,517 in Perth, Tk1,469 in Bristol, Tk1,286 in Chicago, and Tk1,204 in Vancouver.
Effective economic interventions
The CPD suggested that the government can increase the tax area by raising taxes on such unhealthy products.
Despite the robust export growth, the current account deficit reached $10 billion at the end of January of the ongoing FY22 owing to higher import growth and negative growth of remittances.
A few products are important to us regarding the world economy and fuel oil is one of them, said Fahmida Khatun.
Due to the Ukraine-Russia war, the price of fuel oil exceeded $100 per barrel and there is fear that if the war prolonged, the prices will rise further.
As part of the strategy, CPD suggested the government make advance purchases of fuel oil to mitigate economic pressure as it believes that making deals when global prices are high will add greater stress on the country, given the shrinking fiscal space.
Regarding the banking sector, the presentation said that despite several provisions in view of the pandemic, the banking sector is plagued by classified loans and capital shortfalls.
Moreover, the CPD concluded the event with a set of recommendations including the need for strong market intelligence is critical.
The CPD also said that unscrupulous market players have always been active to take advantage of difficult periods, by stockpiling and creating artificial crises in the market.
Regarding this, efficient market management through close monitoring and supervision will be critical to keep the commodity prices under control during Ramadan and beyond.
The volume of sale of essential commodities through the open market sale (OMS) should be increased.
Distribution of these commodities must be managed effectively and without any corruption, so that the eligible people have access to these items at low prices.
The government should provide direct cash support to the poor, enhance social protection for low-income families, and extend stimulus to the small businesses for their survival during difficult times.
The government should prepare for maintaining adequate food stock not only through better agricultural production but also through importing food.
There is a need for actual demand estimation of rice and other food items in the country.
During a crisis, food-exporting countries would not export food without meeting their domestic demands first. If they decided to export, the prices would be exorbitant. Therefore, planning the production and import of food should be done early on.
Curbing inflation should be the center of policy attention of the government at present.
An independent banking commission should be formed on an immediate basis to mitigate the disarrays within the sector.
Subsidies on fuel, power and agriculture should be continued for the next few months.
Priority for public expenditure should be set clearly.
Inflationary pressure will hamper a sustainable and inclusive pandemic recovery, since the real purchasing power of many people will decline, causing further inequality.
Prof Mustafizur Rahman, distinguished fellow of CPD, and Zahid Hussain, former lead economist of the World Bank, and M Tamim, professor of BUET, also spoke at the event.
