Local currency devaluation is now a major concern

The government data on the inflation rate last year came in stark contrast to the data revealed by the Consumer Association of Bangladesh (CAB). It very often happens that the government data doesn’t reflect the real picture but it is very much understandable from our real life situation. When organizations like CAB come up with the real picture based on their survey and study our understanding is logically proved.

The government and the central bank’s projection of inflation rate time to time didn’t reflect uncontrolled money depreciation against dollar perfectly. With the data published on January 21 by CAB the gravity of the situation came to light. In fact, the overall inflation rate in 2022 hit a record high of 11.08 per cent rather than the data projected by the government that put it at 7.7 per cent.

The general inflation rate began to rise from the month of February last year and continued to go up with respites for a short period in between. The government efforts to tame the inflation seemed inadequate and sometimes unrealistic. It significantly increased the activities of Open Market Sale (OMS) to rein in the inflation but it didn’t produce any visible result.

The Business Post on 22 January in its report quoted CAB Chairman as saying: “Bangladesh’s has progressed in the last decade. People’s incomes have increased. Our per capital income has increased. But our living costs have also increased.”

He further said: “Although the number of poor population has decreased around four crore people are still living below the poverty level. So inflation has become a serious issue in people’s lives. When product price increases, there is a little hope that it will ever come down. So the increased cost triggered by inflation should be adjusted by boosting the income.”

CAB didn’t only analysis and came up with the real picture of inflation it also put forward some time-befitting suggestions and recommendations to get rid of the situation. It stressed the need for increasing subsidized food aid and social protection to reduce pressure on low and middle-income consumers living in urban areas. But how much it will work amid a fresh rise in the prices of gas and fuel oil prices is now a big question and challenge for the government to tackle the situation.

The way the money is being devalued we may not experience any positive result soon. In the first six months of the current fiscal year 2023 the money has already been depreciated by 11.3 per cent against dollar showing no hope of any positive sign in the days to come. Even after introduction of the floating money exchange rate, though how far it has been executed has remained a question, in September last year the money continued to be devalued.

The money depreciation in Bangladesh is the highest among its neighboring countries. The scenario was revealed in the Monetary Policy Statement for the second half of the FY23. The central bank itself said Bangladeshi taka depreciated sharply during the first half of FY23 reflecting excess demand for the foreign exchange currency along with the appreciation of the USD in the global market.

When asked why even after the introduction of the floating exchange rate money has been devalued sharply compared to the neighboring countries Former lead economist at the World Bank’s Dhaka office Zahid Hussain said even before the USD crisis the central bank had been supplying dollars from the reserve to retain the value of taka while the neighboring countries didn’t do that. What they did they gradually devalued their money against the US dollar over a period of two years and that is the reason their devaluation is less visible than the taka.