Challenge of taming inflation

While inflation is on the decline all around the world it continues to go up in Bangladesh. The government has so far mainly blamed the Ukraine-Russia war for the growing inflation in the country. In May Inflation dropped to 6.1 per cent in European Union countries while it came down to 6.3 per cent in Germany and 6 per cent in France. Turkey too found its inflation a record low in the month of May since 2021.

In Vietnam inflation came down to 2.43 per cent, the lowest in 14 months while Thailand’s inflation hit a 16-month low. The data on the inflation of May in the USA and India is yet to be published but the month of April recorded the low inflation in the UK and its neighbouring country. The government has set the target of inflation at 6 per cent in the next fiscal year.

But the way inflation keeps going up it seems it will go up further in coming months. According to experts, inflation may go up in the month of June as the government had imposed different types of taxes. The imposition of new taxes will further push the prices of essential items up. In the budget speech, Finance Minister AHM Mustafa Kamal told the parliament that due to the decrease in the prices of fuel, food and fertilizer in the global market along with adjustment of fuel prices in the domestic market and the government initiatives to keep the food and supply systems normal, inflation will remain much controlled in the next fiscal year and the annual average inflation is expected to stand at around 6.0 percent.

His speech is not only full of wishful thoughts it also raises question about the integrity of the Finance Minister. When he said in international market prices of fuel, food and fertilizer had dropped did they go down or will they come down in our country? If not, how did the minister expect that they would bring down inflation in our country? Will it happen even if the prices of those items don’t come down in our country? The answer to this question remained unanswered in the budget.

It is a matter of serious deliberation. Inflation can never be contained depending on our wishful thoughts. Nor it could drop in our country with prices of essential items decreasing in other countries and going up in our country. The budget even didn’t place anything that could tame the raging inflation. Of course, initially the Ukraine-Russia war impacted badly not only our economy but also the economies of other countries around the world.

But mainly domestic policies in our country are now mostly to blame for the runaway inflation. One of the steps the government took in the outgoing fiscal is heavy borrowing from the banking system to meet the budget deficit. This huge loan to the tune of Tk85, 024 crore has stoked inflation in the country. This extra money taken from the banking system went to people’s hands creating extra demand for goods and services stoking inflation.

The government in the next budget also planned to borrow more than what it borrowed in the outgoing fiscal year. The same policy to meet the budget deficit will stoke inflation further. This is one of the key reasons behind this runaway inflation. We think that the government has to stop taking loan from the banks. It should rather retrieve the money from loan defaulters and black money holders to meet the budget deficit.

On top of that, it should also stop the price manipulation, increase food production and bring down the price of essentials to curtail inflation.