Inflation has been persistently high in Bangladesh, affecting the lives of many as they struggle to survive on fixed wages in the aftermath of the Covid-19 pandemic.
Figures released on Sunday showed general inflation remained virtually unchanged at 9.69% on a point-to-point basis for the month of July, having been 9.74% in June, said the Bangladesh Bureau of Statistics (BBS).
The Ministry of Finance and Bangladesh Bank (BB) blamed external factors for high inflation while they failed to adopt the right fiscal and monetary policy measures, said economists to UNB.
Talking to UNB, former governor of the Bangladesh Bank Dr Atiur Rahman said Bangladesh could not adopt an adequate tightening of the monetary policy in time to rein in inflation while the US Federal Reserve continues to raise policy rates.
He said the Reserve Bank of India (RBI) has also been raising policy rates consistently, while agriculture production is rising to strengthen the supply side.
The market imperfections caused by growth curtail the root cause of higher food inflation and other necessities.
The depreciation of the Taka had also increased import costs, and exacerbated inflation rates. The rent-seeking on the roads by some quarters besides higher transport prices due to readjusted fuel prices may have also been fuelling inflation from the supply side, Dr Atiur said.
He suggested the ways out may be to further tighten monetary policy and reduce public expenditure to reduce public borrowing from the central bank to align fiscal policy along with tighter monetary policy.
The Competition Commission and Consumer Protection Authority must break this cycle. The roads should also be made rent-free to facilitate smooth flows of goods and daily necessities.
The exchange rate must be stabilized at a single rate and hurdles for small entrepreneurs in opening letters of credit with adequate dollar support could ensure smooth supplies of imported goods and raw materials for continued production of goods and services and could also help stabilize prices.
Dr Zahid Hussain, the former lead economist of the World Bank's Dhaka office, told UNB that no measure has been taken to rein the inflation so far.
He said the reigning repo rate is not affecting the market, and the increase of 1% in interest rate from July is not making any impact on the money market.
He pointed out that printing currency to meet government expenditures is also fuelling inflation.
Dr Zahid said there is no control over pricing of essential products in the market, and businesses are making hefty profits showing supply-side uncertainty in the wake of the foreign exchange crisis.
Dr Ahsan H Mansur, former economist of IMF and executive director of Policy Research Institute (PRI), told UNB that the Bangladesh Bank printed more currency (taka) in a single year than it had in the last 50 years, which brought additional inflationary pressure.
Countering Bangladesh Bank’s claim that printing more money has had no impact on inflation, Mansur said printing money against the US dollar, which commercial banks sold to the central bank, is a different issue.
Explaining the situation, Dr Mansur said despite the dollar crisis, the printing of high-speed money (printing currency) is continuing, which obviously has an impact on higher inflation, resulting in Bangladesh’s inflation rising while Sri Lanka and other Asian countries’ inflation is falling.
