Inflation and profiteering

When there is chaos and turmoil in the economy, everything and every attempt of the government go futile. When one of the items is set right others go in the wrong direction.

For the last couple of years, our economy has been in deep trouble. Some segments of the phenomenon are linked to the international economic slowdown while others emanate from mistakes inside the country, as has already been indicated by the renowned and leading economists of the country.

When the government imposed restrictions on imports to keep intact its foreign exchange reserves it virtually affected our daily lives as being an import-dependent country Bangladesh failed to import many of the daily essential products pushing the prices up. This is one of the examples of the attempts by the government to bring normalcy to the economy and to bring it back on the right track. But like everything else of similar nature the economy has its own course and which is why when there is something wrong goes on it always takes time to heal the wound.

The wounds caused by many international and national reasons are now causing damage to the other parts of the socio-economic system. After many such attempts, the government thought it could easily inflate its exchequer. But that was not to happen as it was not supposed to happen because the economy follows its own course of action. Due to the rise in the prices of essentials, the government should have earned more revenues but it has had a boomerang effect.

The hiked prices reduced the purchasing ability of people forcing them to cut their monthly budget on non-essential items. As consumption fell, the revenue collection of the government shrunk significantly. The Business Post ran a report on the issue recently. The report quoted the National Board of Revenue data that said the Value Added Tax (VAT) revenue from major sources including tobacco, telecom and sweet sectors had drastically fallen.

In a recent meeting of Customs and VAT Wing NBR Member (VAT Implementation and IT), Moinul Khan presented the data on these sectors and said: “The scenario of revenue collection in sweet and telecom sectors is not satisfactory, rather it is disappointing.” If we take the tobacco sector as an example it is found that people have not reduced their consumption of tobacco but the smuggling of tobacco products has gone up bringing down the government revenue collection.

It shouldn’t have been otherwise as the government took the decision to increase the price of tobacco rightly but it didn’t close the loopholes that might stand in the way of the implementation of its decision.

Similarly, gas connections to households have not been given for quite a long time but illegal connections are being given by various syndicates all across the country. When there is no effective administration to carry out government orders any kind of decision finally falls flat.

As per the financial report published by the listed companies, they have also seen a big drop in their sales. Finally every loss of the government – be it for its failure to implement its decisions or be it for any loopholes and failure of its agencies – finally falls on the shoulders of the common people. The lives of people have already turned into a veritable hell because of steep price hikes for essential items. Their backs are against the wall.

This time too inflation has increased the profit margin of the businesspeople. Commenting on the matter former World Bank Dhaka office lead economist Zahid Hussain told The Business Post: “The price hike of commodities put the consumers under more pressure, making a dent in their savings but increasing the profit margin of the businesspeople. The revenue board is yet to collect more revenues from the profit margin.”