Taming prices of Ramadan essentials a key challenge

With the month of Ramadan approaching prices of daily essentials are likely to get another leap or rather a quantum leap that we usually see happening in the country. But this time the situation is much worse than the previous times before the month of Ramadan.

As the Ramadan, expected to begin in the middle of March, is nearing the overall economic condition of the country is as volatile as before. Although for a couple of months before the immediate past year came to an end the high-ups of the government had come up with the overarching message that everything would be alright in the month of January. But we are yet to see any hope in sight.

The forex currency reserve continues to drop prompting the government to impose restriction on imports of many essential daily items. Apart from the government restriction on imports, banks are in most cases unable to open Letter of Credit (LCs) without which the importers can’t bring in some very essential items. Being an import-dependent country Bangladesh depends largely on importing goods.

During the month of Ramadan, basically six essential commodities – edible oil, sugar, lentil, onion, chickpeas and dates are to be imported in large quantities. But if the importers can’t open LCs they can’t import those Ramadan essentials much to the discomfort of the Muslim community people who are in the habit of eating ifter items with those commodities.

The major newspapers including The Business Post ran stories on the low supply of those commodities pushing up their prices. Traders and businessmen are worried about what is going to happen if they fail to open LCs at least two months before the holy month of Ramadan begins. If they can open LCs by the month of January then their products against the LCs will reach the country in the first or second week of March.

For now, it seems to be unattainable given the steady decline in forex reserve and dollar crisis for lack of which the banks are reluctant to allow importers to open LCs. Under this circumstance, traders and businessmen sat at a meeting with the Commerce Ministry on January 4. Leaders of various trade bodies and the government officials from Bangladesh Bank, National Board of Revenue, the public Security Division, the Commerce Ministry, the Trading Corporation of Bangladesh and the Consumers Association of Bangladesh.

After the meeting on December 4, the Commerce Ministry on December 5 requested Bangladesh Bank to keep aside a certain quota of the US dollar for importers to facilitate their imports of six essential Ramadan commodities so that no supply chain disruption happen during the holy month.

Senior Commerce Secretary Tapan Kanti Ghosh told the media: “We have recommended the central bank to reserve the dollar from the receipt of export of merchandise and from the remittance, not from the reserve of the Bangladesh Bank. The move has been taken only for the month of Ramadan. However, all depends on the central bank as it will suggest the private commercial banks for allocating the quota of dollars in this case.”

Now the key challenge of the government to contain the price hikes of essential Ramadan commodities is to solve the waning dollar crisis. Economist and business experts have already put forward some suggestions for the government to follow. But it is yet to take any decision. It is swinging in between decision and indecision.

We are still in the dark if interest rate cap has been withdrawn or not. Similarly, as per the International Monetary Fund (IMF) suggestion, the government decided to put in place the floating exchange rate. If the interest rate cap continues and floating exchange rate is not executed, I think, it will be almost impossible to facilitate imports of essentials Ramadan goods pushing the prices up further.