Inflation edges up 10.11pc

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Steps for improving supply and business confidence worked little
Nazmul Ahsan and Sheikh Shahariar Zaman

Inflation edged up to 10.11 per cent in August, eating into people’s real incomes and proving measures to address supply-side constraints still inadequate.
Point-to-point inflation soared to its record high of 10.10 per cent in July and inched up by 0.01 per cent in a month, Bangladesh Bureau of Statistics data showed.
Economists and a consumer rights activist said unabated price hike of food items led to the double-digit growth of inflation and called for urgent steps to give consumers a respite from skyrocketing prices and restore business confidence.
The country’s economy would head for a state of stagflation if the government fails to cool off some heat and check erosion in business confidence, economist Atiur Rahman cautioned.
Official statistical agency’s figures show annualised average inflation kept on creeping up steadily from as low as 1.66 per cent in 2000-01 fiscal year to 7.1 per cent in 2006-07, negating the impacts expected from an extra-cautious and contractionary monetary policy pursued by the central bank for years at the instance of IMF.
The rate was 3.58 in 2001-02 and continued to go up since then, with 5.03 in 2002-2003, 5.64 in 2003-04, 7.35 in 2004-05 and 7.54 in 2005-06, according to the economic survey of the finance ministry.
The jump was more galloping in point-to-point counts this year, from 5.94 per cent in January to 10.11 in August.
Disruptions in domestic supply chain, volatility in global commodity market as well as depreciation of taka against dollar and Indian rupee raised the costs of imports, since Bangladesh’s food demands are largely met by imports with India being a key supplier, Atiur pointed out.
Cumulative impacts of these factors pushed up the local price levels especially of essential food items, he said, suggesting that the government should increase food grain import to keep prices stable.
Export ban recently slapped by India on onion and rice would make the things even worse.
‘The government could make some alternative arrangements beforehand or at least negotiate with India on the export ban,’ he said.
He also blamed disruptions in the domestic supply chain for the price volatility. ‘Traders are still shaky and do not have enough business confidence,’ he said, indirectly referring to the intensified drive against corruption and tax evasion that landed many top businessmen in jail and scared many others.
He reiterated that business confidence must be restored to prevent the economy from heading for worse.
‘The government has taken some initiatives but those are yet to give the desired results,’ he said.
Soaring food prices are the main culprits for the galloping inflation as they gained 11 per cent and non-food prices over 5 per cent in the first month of the current 2007-08 fiscal year.
Quazi Faruque, general secretary of Consumers’ Association of Bangladesh said the situation will not improve until and unless the government takes cognizance of businessmen’s aspects.
‘Businesses have to be allowed to run normally if we are to see market situation improving,’ Faruque told New Age on Wednesday.
‘Things are not improving as desired despite some attempts taken by the government.’
The consumer rights leader underscored the need for strengthening legal instruments to get rid of ‘artificial’ price hike.
Consumers of all walks of life expressed their utter frustration over the persistent price hike, particularly of essential food items.
‘It is unbearable since the average prices of major food items have almost doubled in a year,’ said Shahana Chowdhury, a regular shopper at the Shantinagar kitchen market.
She believed that the real price inflation would be much higher than the official figures.
Rafiq Uddin, a chartered accountant, demanded that private institutions should be engaged in calculating inflation to get a real picture.
Zaid Bakht, research director of Bangladesh Institute of Development Studies, said the double-digit inflation simply proves that all efforts made by the government to contain inflationary pressure have failed.
‘The government has to lessen harassment of businessmen so that they feel encouraged to import both food and non-food items,’ the economist of the official development think-tank told New Age recently.
‘Besides the private sector, the government has to import food items and ensure their smooth distribution through an efficient and effective network.’
Unabated price inflation also worries the government’s high-ups.
Finance adviser Mirza Azizul Islam at a programme recently said soaring prices are eating into the savings of fixed-income group people and forcing them to spend more to meet their minimum needs.
‘If price goes up, fixed-income people buy less commodities or exhaust their savings to buy daily necessities,’ he said.
Since the poor and fixed-income people are the worst sufferers, development economist Atiur Rahman felt that the government should widen the scope and coverage of social safety-net programmes to offset the impacts of soaring price inflation.
Inflation for small traders, low-paid apparel workers, rickshaw pullers and day labourers went up by 21 per cent in August this year compared with August 2006, showed a recent study of Unnayan Shamunnay, a local research organisation.
Higher import costs inflated local prices of rice, wheat and edible oils by 2.3 per cent, while upward adjustment of domestic fuel price in April added another 1.1 per cent, bringing about 36,000 families below poverty line afresh, says the economic outlook of Unnayan Shamunnay

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