Food inflation in the country reached a double digit figure of 10.22 percent last month despite central banks various measures to control money supply to stem inflation. Non-food inflation last month fell to 9.34 percent from 9.64 percent in March. Moreover, the central bank also stated that inflation is projected to remain elevated at approximately 9.4 percent year-on-year in FY24 but anticipated to decline to around 7.2 percent in FY25.
However, it is the low-income segment of our cities and the rural people who continues to suffer the most because of repeated price hikes in April with general inflation growing at 9.92 percent, up from 9.68 per cent in March.
Despite numerous policies, domestic and international recommendations taming the inflation monster continues a colossal challenge. We believe the persistent high inflation, about to touch double digit necessitates continued monetary tightening over an extended period. Concurrently, maintaining vigilance and engaging in strategic planning are also imperative for navigating potential fluctuations in the economic landscape.
Million dollars questions, however, given the global inflation coming down during the last 18 months, why inflation in Bangladesh remains abnormally high since mid 2022? And why inflation in countries like India and Sri Lanka are less than 6 percent while it remains above 9.6 percent in Bangladesh?
We simply fail to comprehend this divergence.
As the inflationary pressure in Bangladesh remains worrying, it is essential to pinpoint its possible drivers.
According to the latest monetary policy statement published by the Bangladesh Bank, our inflationary pressure is fuelled by 3 key factors: supply chain disruptions stemming from post-Covid demand spike and Ukraine-Russian war, exchange rate depreciation due to higher import bills in FY 2022 (Possibly due to excessive money laundering through over-invoicing of imports), and a sharp energy prices adjustments after the Ukraine-Russia war.
We consider the assessment correct, but incomplete. While we remain helpless to external factors, how are we dealing with internal manmade ones? And as for food inflation , it rose to a 5-month high in April as measures of the government and the central bank aimed at reining in elevated consumer prices are yet to be materialized.
We call on the government to address all the underlying reasons behind food inflation through a well-formulated action plan. Reforming flawed policies, wiping out syndicates, addressing supply chain inefficiencies and ensuring market competition must become top priorities.
Moving forward, it is encouraging to note that BB has moved away from its earlier narrative and has announced to adopt a tighter monetary stance in its latest Monetary Policy Statement. It is crucial to strengthen the orthodox policy measures, and allow the next 6 to 9 months of time for BB policies to deliver the desired outcomes.