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Bangladesh still has the highest inflation rate among South Asian nations, excluding only Pakistan, making it evident that Bangladesh has not been achieving tangible success in tackling the issue.
Although the Bangladesh Bank governor recently expressed optimism that inflation will be brought down to 8 per cent by December, economists believe that the ongoing political unrest may make the target difficult to reach.
An analysis of inflation data of the four major economies of South Asia – Bangladesh, India, Pakistan and Sri Lanka show that the highest inflation in October was 26.9 per cent in Pakistan, the second highest was 9.93 per cent in Bangladesh.
India's inflation was 4.87 per cent and Sri Lanka's was the lowest at only 1 per cent during the same month.
Data from January to October this year show that among these four countries, Sri Lanka has shown the most efficiency in controlling inflation. The country’s inflation peaked at 53.2 per cent in January, but eased to 0.8 per cent in September.
However, it slightly increased to 1 per cent in October this year.
Regarding Sri Lanka’s success, Bangladesh Bank Governor Abdur Rouf Talukder told reporters last Sunday, “What happened in their case was that the price of Tk 100 items increased to Tk 170.
“From there, it increased to Tk 172 or Tk 175. But in the case of Bangladesh, a Tk 100 item increased to Tk 109, which means our inflation rate is lower than the country.”
He then added, “Besides, Sri Lanka's GDP is only a quarter of Bangladesh’s GDP. Our population is also much larger than theirs. So it will take some time for us to control inflation.”
Speaking to The Business Post, Policy Research Institute (PRI) Executive Director Ahsan H Mansur said, “The IMF programmes in Pakistan and Sri Lanka were very tough, and they were getting good results.
“Bangladesh actually did not do much under the IMF programme. As a result, we are not getting the same results in taming inflation, like Sri Lanka or Pakistan did.”
Inflation in Pakistan was 27.6 per cent in January, but it increased in the following months and reached a maximum of 38 per cent in May this year. However, this rate began to decline from June. But it rose again to 31.4 per cent in September due to the increase in fuel prices.
However, inflation in Pakistan again declined to 26.9 per cent in October.
Meanwhile, India has shown great skill in controlling inflation. Since the beginning of this year, inflation in the country was limited to around 6 per cent. Though it exceeded 7 per cent in July, it later fell to 4.87 per cent in October this year.
But the situation in Bangladesh is a little different compared to other countries. Bangladesh has seen inflation close to 10 per cent throughout this year. Although it has decreased in other countries, it is still on the rise in Bangladesh.
Inflation rose to 9.93 per cent in October from 8.57 per cent in January, the second highest this year. Inflation had reached a maximum of 9.94 per cent in May last year, compared to the last decade.
Bangladesh also saw the highest food price inflation in the last decade at 12.54 per cent in August, which further increased to 12.56 per cent in October.
The Bangladesh Bank governor says that the central bank is trying to curb inflation by increasing the interest rate and reducing the money flow.
At his office on Sunday, Abdur Rouf told reporters, “I am optimistic that the move will help slash inflation from this November. We fixed the inflation target at 8 per cent in December, and it will be brought down to 6 per cent in June next year.”
As a step to increase the interest rate, the Bangladesh Bank increased the policy rate to 7.25 per cent, which was 6 per cent in January.
Besides, the central bank introduced SMART (Six months Moving Average Rate of Treasury Bill) by lifting the cap on loan interest rates, resulting in interest rates now hovering around 11 per cent.
SMART was 7.43 per cent in October, and with the 3.5 per cent margin, the bank loan interest rate was 10.93 per cent.
This interest rate is expected to increase further in the future. Because the treasury yield sold by Bangladesh Bank exceeded almost 10 per cent in October, which was 10.5 per cent in case of bonds.
Ahsan H Mansur said, “Non-economic factors are creating more obstacles to curb inflation in our country. It has an impact on imported goods because the USD price is high.
“Meanwhile, the price of new rice is not coming down in the market. Even though the price of vegetables will decrease slightly in the winter, there is doubt. The political unrest could make taming inflation difficult.”
