Mass people of the country, particularly lower and middle income people, have been suffering a lot due to inflationary pressure since the Russian Ukraine war in 2022. Following the Russian invasion in Ukraine, global supply chains were disrupted and the price of oil, gas and food grains etc. increased abruptly. Consequently, Bangladeshi people have also been suffering a lot owing to huge pressure of inflation, although it is not a party to the war. Due to war, demand for dollars has increased which prompted the US Federal Reserve to raise the interest rate of dollars. The Fed hike of interest rate of dollar, depletion of our foreign currency reserve, depreciation of taka against dollar and controlling LC opening to import goods etc. have paved the way for rising inflation in our country
Despite the reduction of price of all commodities in the international market,Bangladesh inflation, both food and non-food, has gone unabated recently. The inflation has surged after taming for 4 consecutive months since August 2022 according to BBS data. In August 2022, the country experienced the highest ever overall inflationary pressure which stood at 9.57 percent. Then consecutive 4 months have seen little dip of overall inflation and stands at 8.37 percent. Last month of February, overall inflation reached 8.87 percent. The food and non-food inflation have jumped again as the holy month of Ramadan is approaching. Price of commodities has increased exorbitantly. For instance, Broiler chicken's price has shot up from tk150 months ago to tk210. Price of coarse rice, grocery items, fishes, meats and vegetables have also increased. The most affected people of rising inflation are lower and middle income people.
On the other hand, to meet up IMF conditions, as it has been pressing the government to adjust the price of electricity and gas based on the market price on regular intervals, the government has adjusted the price of electricity and gas twice which has fuelled overall inflationary pressure.
In order to contain inflation, economic experts are suggesting to uncap the existing deposit and lending rate cap 6 and 9 percent, which was imposed by Bangladesh Bank a couple of years ago. Bangladesh bank has not taken the initiative of uncap deposit and lending rates. IMF also suggests that the market should decide the deposit and lending rates. Interest rates rise would curb the public spending and contain the money circulation.
Due to reserve shortfalls and Bangladesh Bank directives, LC opening has seen a negative trend. Due to Bangladesh bank measures LC opening has reduced to 25 percent in July January of FY 23. Earlier our import was around USD 7.00 billion which has dropped and stood at around USD 4.50 billion. Imposing restrictions, due to dollar crunch, on imports has also been exacerbating the inflation.
To safeguard the low income people from ever increasing inflationary pressure, the government should take some measures and enhance its social safety net program. It must give access to subsidized products to its marginalized people and reduce tax burden on them. Government can play a significant role through its machinery, Trading Corporation of Bangladesh (TCB), widening its coverage and selling essentials at an affordable price. Apart from this, the Government should monitor the market so that vested interest groups cannot reap the benefit in the pretext of volatility of the market.