Reining in soaring inflation

We believe that price inflation should be the key concern of the government, considering that no data — no matter how accurate it is — can truly capture the misery of the people. In the recent days, people with limited income has seen runaway inflation wear down its already stretched savings, destabilise its household budgets, and hugely erode its purchasing power. The people deserve some relief and protection from the rapidly surging cost of living.

A recently published report published in The Business Post, alluding to leading economists of the country, stated that soaring inflation is continuously eroding consumers’ purchasing power and there are fears that poverty, which increased during Covid-19, will rise further. The economists told The Business Post that real wage is declining, causing consumers to lose purchasing power, which is forcing them to compromise on diets. The common people do not need any figure to understand the painful impact of the unaffordable cost of living. Numbers cannot capture or reflect the helplessness felt by people from low- and lower-middle-income households when they purchase groceries, buy fuel, and pay their electricity, health and education bills.

The authorities concerned need to focus on reducing inflation in the country. No one is saying that it will be an easy job considering the uncertain global economic environment. There is no denying the fact that the ongoing conflict in Ukraine has contributed to the surge of inflation. Disruptions in global oil markets such as sanctions on Russia, a major oil- and natural gas-producing county, and Saudi Arabia's refusal to increase its production have resulted in price hikes in the global market. 

 Because of inflation, the real income and wage of poor people would erode more sharply compared to the rich, and the income inequality between the rich and the poor will diverge. Furthermore, because of the rising prices of food, energy, and other essentials, poorer and vulnerable households will have to spend even more on food and energy, which would, in many cases, impede their ability to afford their children's education or healthcare services.

According to media reports, LC margins for luxury goods, fruits, non-cereal foods, canned and processed foods will be increased comprehensively to discourage their imports in the upcoming fiscal year.

Rising import cost along with a slowdown in remittance puts a pressure on the foreign exchange reserve, which should be an area of priority.

There are two ways to ensure steady flow of remittance and one is to immediately instigate measures to explore new labour markets for exporting manpower. Bangladesh has been sending workers in the blue collar category for almost four decades and the key destination has always been the Middle East. Keeping the precarious global economy in view, the focus should be to go to Africa and South America and also tap into the international market for white collar workers.

While developed nations have been eager to take semi-skilled workers, for professionals they have always looked to countries other than Bangladesh. This trend needs to change because Bangladesh, can now offer top quality professionals for all sectors starting from academia to media to international development.

The economy is going through a painful adjustment at the moment and all markets are in disequilibrium as demand and supply adjust to inflationary pressures. Some sellers are seeking to take advantage of the prevailing disorder by creating artificial shortages or jacking up prices based on different pretexts. Economics dictates that prices will eventually reach a rational level as buyers adjust their spending and sellers realise they cannot continue to make unnatural profits during an economic downturn.

However, the government cannot give profiteers and hoarders a free hand till the markets reach a new equilibrium. Global market conditions may be uncontrollable, but oversight of local markets is still very much in the state’s domain. The government must act and take strict action against exploitative practices and protect citizens’ interests where it can.