Home ›› 21 May 2023 ›› Front
Nazrul Islam, a resident of the capital’s Maniknagar area, visited his local kitchen market on a Friday to buy essential food items for his family. He was planning to buy his family’s weekly supply of soybean oil, sugar, onion, garlic, chicken, and vegetables.
Little did he know that the prices of most items in his grocery list have gone through the roof within just a week, forcing him to skip buy chicken altogether, and reduce the amount of eggs he wanted to take home.
Nazrul, along with the lion’s share of Bangladesh’s middle and low income segment, is feeling the sharp bite of inflation, evident by the steadily rising cost of living ever since the Covid-19 pandemic hit Bangladesh.
Struggling to make ends meet, many are demanding measures in the upcoming budget to reduce the cost of living so that the people can live comfortably.
Economists and analysts have recommended several measures such as reducing import duty on some products, solving the USD crisis, increasing the interest rate on savings certificates, expanding the social safety net, and increasing the tax-free income limit.
If steps are taken to create employment, the pressure of high inflation can be handled to some extent.
Experts say the budget – taking these issues into consideration – should keep imports normal by giving tax exemptions on some products. Besides, the scope of social security should be increased as well.
Inflation and the kitchen market
The price of most of the essential food items, including rice, gram, oil, sugar, fish, meat, and vegetables have increased gradually. Many things are being cut from the daily diet to cope with the pressure of increased expenses.
Compared year-on-year, the price of rice rose by 8 per cent – 14 per cent, sugar 65 per cent, flour 19 per cent – 29 per cent, gram 26 per cent, edible oil 9 per cent, meat 15 per cent, chicken 37 per cent, egg 21 per cent, milk 31 per cent, potato 74 per cent, onion 98 per cent, and ginger 175 per cent, show Trading Corporation of Bangladesh and kitchen market data.
Consumers Association of Bangladesh (CAB) data reveals that the cost of living in Bangladesh increased by 10.08 per cent in 2022, compared to 6.92 per cent in the previous year.
However, according to the Bangladesh Bureau of Statistics (BBS) data, inflation in the country stood at 9.24 per cent in April 2023, compared to 6.29 per cent when compared year-on-year.
Inflation in Bangladesh had reached 9.52 per cent in August last year – the highest in over 11 years – due to rising commodity prices and record hikes in fuel prices.
Dilemma of an average shopper
Nazrul, during his kitchen market visit on a Friday, abandoned his plan to buy chicken and decided to get eggs instead, only to find that the price of eggs also increased by Tk 10 per dozen compared to the previous week.
Despite the increased price, he had no alternative to buying eggs, because his sons and daughters would be deprived of protein for the whole week.
Sharing his predicament, Nazrul told The Business Post, “I have a family of five with three children. I earn Tk 20,000 per month working in a clock shop near the city’s Baitul Mukarram Mosque.
“Tk 12,000 goes to rent, and the remaining money is not sufficient to cover my children’s education expenses and food for the family. So, after working all day at the clock shop, I sit at a table in front of my home to repair watches, in hopes of earning a few hundred Taka more.”
He continued, “The increased prices of daily commodities have already pushed my back against the wall. It has now become difficult for a low-income person like me to survive.
“I don’t know what’s in store for me in the upcoming budget, but I want only one thing, the assurance that I can eat and survive. I want specific measures targeted towards reducing the prices of daily essentials.”
A recent research conducted by the Centre for Policy Dialogue (CPD) revealed that a family of four in Dhaka city has to spend Tk 22,664 taka on food every month. To reduce the expense, one has to reduce the consumption of fish and meat.
Even if a family does not eat fish and meat at all, the family has to spend Tk 7,131 for food. This cost is 25 per cent higher than a year ago.
The CPD research was conducted last February. Since then, the prices of all products including oil, sugar, fish, meat, milk, eggs, onion, and garlic have increased several times. As such, the current household expenses are much higher than that estimate.
At present, a family of five like Nazrul’s is being forced to spend less on accommodation and food. And to meet the educational and medical costs, they have no alternative but to take loans.
Arif, a hotel worker in Gopi Bagh, and Md Shahidullah, a security guard in Basabo area, are in the same situation as Nazrul.
The middle class is in the same predicament as the low-income people. According to a recent study, a typical middle-class family now spends 60 per cent of their total income on food.
In its February study, the CPD recommended tax exemptions on 28 types of products including meat, chicken, fish, various types of milk and dairy products, tomatoes, and onions, to keep the prices of daily commodities stable.
“Salaries should be increased by 5 per cent in the private sector to deal with the commodity price situation. Besides, the minimum tax-free income limit should be increased from Tk 3 lakh to Tk 3.5 lakh,” said director of the CPD research Khandaker Golam Moazzem while disclosing the findings of the report.
Muntasir Kamal, the research fellow of CPD, said, “Currently, 3 per cent to 90 per cent taxes including income tax, excise duty, and value added tax (VAT) are levied on the import of 28 types of daily commodities.
“If the tax rate is brought down a bit and strict market monitoring is ensured, it can benefit the consumers to some extent.”
However, when the CPD made these proposals in February, duty exemption facilities were in place on soybean oil and sugar which will be lifted on June 1.
Zahid Hossain, the former chief economist of World Bank Dhaka Office, said, “Three steps should be taken to control inflation – improve supply management in the budget, reduce the pressure of demand, and take steps to deal with the livelihood crisis of poor people.
“And to solve the dollar crisis, the best option is to leave it to the market, which the central bank has already done.”
He added, “The poor people bear the brunt of rising commodity prices or inflation as it poses a livelihood crisis for them. And for the middle class, inflation brings forth a savings crisis, because, when inflation increases, they are forced to spend from their savings.
“So, the allowance for the poor has to be increased in the budget, besides expanding the social safety net.”
The economist then pointed out, “Besides, due to bureaucratic complications, the related organisations do not get the subsidy allocation money from the Ministry of Finance on time. It has to be ensured that imports are not blocked due to a lack of financing.
“A decrease in imports will ultimately disrupt production.”
Economist Ahsan H Mansoor believes that bank loan interest rate and USD rate are the most important factors in controlling inflation.
“Inflation cannot be tamed unless the interest rate on bank loans and currency exchange rates are increased and money printing is not stopped. The current government is subsidising the budget by printing money. The country has to get out of this practice,” he added.
Mansoor further said, “On the one hand, the government is not able to reduce inflation because it has to print money, and on the other hand, the loan interest rate has been capped and the economy is not able to come out of the dollar crisis.
“And as long as the dollar crisis persists, the supply of goods will not be sufficient. As a result, the inflation will not be controlled and the way to increase investment and growth will not be paved.”
Consumer Association of Bangladesh (CAB) President Golam Rahman said the monetary policy of Bangladesh Bank should be time-befitting to control inflation. Inflation must be curbed and the dollar crisis must also be resolved.
“Although the price of many products has decreased in the international market, we are being deprived of the benefit due to the high value of the USD. This issue is very important, especially to keep the prices of daily essentials stable,” he added.
