Food consumption cost in Bangladesh witnessed a 12.5 per cent year-on-year rise in August this year, seriously impacting people’s ability to purchase essential food items as they struggle to meet the increasing cost of living amid stagnating wages.
Annual food inflation rate previously rose to double digits in FY11 and FY08, reaching 14.11 per cent and 16.72 per cent respectively.
Bangladesh Bureau of Statistics (BBS) data, published on Sunday, further show that general inflation stood at 9.92 per cent in August as a result of food inflation, while wages increased by only 7.58 per cent.
From January to August this year, May had the highest general inflation rate of 9.94 per cent. Though the government had stated that inflation will decrease in August, the dip in percentage was very minimal.
On August 29, following an Executive Committee of the National Economic Council (ECNEC) meeting, Planning Minister MA Mannan had said, “Inflation rate cannot be brought down by force. Effective policies should be adopted.
“I predict that inflation will drop by 2 to 4 points this August.”
Overall inflation has again edged closer to a new record, beating the minister's forecast, despite the fact that food products prices in the global market are going down. World Bank data show that the International Food Index has dropped by 2.23 percentage points from July to August.
Speaking to The Business Post, Bangladesh Institute of Development Studies (BIDS) Senior Research Fellow Dr Monzur Hossain said, “Some products have to be imported. Besides, some crops were damaged in the recent floods.
“However, a lack of proper market management seems to be the key reason behind high inflation in the country. Moreover, a section of traders is increasing the prices of goods to make a profit. So market management needs to be fixed along with the supply mechanism.”
Rural regions suffering more
Despite rural regions hosting the lion’s share of agricultural production, food inflation is much higher there. BBS data shows that food inflation in cities was 12.11 per cent in August, compared to 12.71 per cent in villages – a 0.60 percentage point difference.
Experts say the rural populace has added many items from the urban areas in their menu, which must be transported. Besides, due to the improvements in the transportation network across the country, agro products grown in villages are quickly being moved to the cities.
This is causing a disparity in the supply and demand of food items in rural regions, and this is causing food inflation to rise there.
Monzur said, “Prices of goods in villages are already higher compared to cities. Studies should be conducted to find out why this is happening. Sometimes, due to disruption of the supply system in villages, the prices of goods go up there.
“On the other hand, even if the agricultural produce is produced in villages, it does not stay there, it moves to the urban areas.”
Food inflation decreases the public’s purchasing power, especially those in the fixed income groups. This also triggers an increase in the number of poor populations. The number of new poor people has already increased following the Covid-19 crisis.
Economists are concerned that the figure will rise due to high inflation.
Policy Exchange Bangladesh Chairman M Masrur Reaz said, “Government data shows food inflation at 12.5 per cent, but the market suggests it is much higher in reality.
“But be it high or low, the bottom line is that food inflation above 12 per cent will definitely affect the low-income segment of the population, and will increase the number of poor people. Malnutrition will also increase as food intake will decrease.”
It should be noted that national non-food inflation has decreased to 7.95 in August 2023, compared to 8.85 year-on-year. This inflation rate was 7.38 in rural, and 8.48 in urban areas during the period.
Situation in South Asian nations
An analysis of publicly available data shows that Bangladesh has the highest inflation after Pakistan among the South Asian nations. This year, Bangladesh saw the highest inflation of 9.94 per cent in May. In the same month, Pakistan also had its highest inflation of 38 per cent.
Pakistan's inflation came down to 27.4 per cent in August, while Bangladesh's inflation is on the rise again. However, according to the IMF conditions, inflation is expected to increase in Pakistan due to the recent increase in fuel prices.
Sri Lanka has shown determination in bringing down inflation. The country's inflation dropped from 53 per cent from January to 4.6 per cent in July this year.
Meanwhile, inflation is rising due to floods in India. Inflation was 6.5 per cent in January. The figure then dropped to 4.87 per cent in June, but again rose to 7.44 per cent in July.
