Story in: June-2024

Story: Food inflation in Bangladesh hit a five-month high last month

Food inflation in Bangladesh hit a five-month high last month

Food inflation in Bangladesh hit a five-month high last month. Because measures aimed at reining in rising consumer prices by governments and central banks have yet to catch on. Official statistics last month show this.

Due to this, the loss of purchasing power in the last two years has continued to be a struggle for the low-income groups and the poor.

Food inflation jumped 35 basis points to 10.22 percent last month from 9.87 percent in March, according to Bangladesh Bureau of Statistics (BBS) data. This is the first time in five months that food price inflation has reached double digits.

However, the Consumer Price Index (CPI), a measure of the average change over time in prices paid by consumers for a market basket of consumer goods and services, fell seven basis points to 9.74 percent in April. In March it was 9.81 percent.

Non-food inflation eased by 30 basis points to 9.34 percent. Inflation remains sticky despite expectations that the government will take appropriate measures to tackle it when it takes office in January. However, after four months, no improvement is visible.

Professor Salim Raihan of Dhaka University's Department of Economics said that we are seeing a deficiency in implementation. He said high inflation has been a concern for some time. "However, we are more concerned about people's food security as the high prices have hit poor families as their incomes have not kept pace with the price hike."

"Tackling high inflation should have been the top priority of the government. But concerted efforts are missing."

The economist cites the sharp rise in prices of eggs and meat.

In Bangladesh, supply chain disruptions caused by the Covid-19 pandemic and the Russia-Ukraine war primarily fueled inflation.

In 2022, when global commodity prices began to fall, Bangladesh's current account balance and significant deficit in the overall balance of payments led to a significant depreciation of the rupee. According to the International Monetary Fund (IMF), the pass-through of sharp devaluation of the local currency accounted for half of the rise in inflation in the last fiscal year to 2022-23.

Additionally, the impact of the second round of fuel price adjustments and commodity market imperfections compounded high inflation, Bangladesh Bank said in January. Over the past two years, the currency has lost nearly 35 percent of its value due to a 30 percent decline in foreign exchange reserves.

The central bank has taken three major decisions to strengthen its fight against inflation. It has loosened its ancient grip on the currency as it will now follow a crawling peg, a flexible exchange rate system. It made lending rates fully market-oriented and increased overnight repurchase agreement rates. The rupee fell 6 percent after the central bank introduced a crawling peg.

Executive Director of the South Asian Network on Economic Modeling Professor Raihan said that it will take time to undertake the initiatives. Economists said that food prices have increased in the global market, which means import-dependent countries like Bangladesh have to pay more to buy them. Moreover, duties and taxes have not been adjusted sufficiently to reduce the price spiral effect.

"There is also inconsistency in the market. Besides, few companies import items, so there is a lack of competition."

Another blow for Bangladesh is the dwindling foreign exchange reserves. As reserves are not improving, the IMF has drastically reduced the net international reserve requirement for the fourth tranche of the $4.7 billion loan. According to the World Bank, commodity prices are expected to experience a slight slowdown in 2024 and 2025 but remain above pre-pandemic levels. -Editor, Based on online information


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