Essentials now luxuries as the poor reel from price shock: CPD

People in Bangladesh have been forced to spend more on food compared to consumers in other countries, and the prices of essentials have surged to such an extent that they have become luxury items for many, the Centre for Policy Dialogue (CPD) said yesterday.

It lists 16 countries where GDP (gross domestic product) per capita is higher than that of Bangladesh, yet consumers in those nations spend less on food compared to the latter.

The countries are Algeria, Bolivia, Brazil, Colombia, India, Indonesia, Iran, Iraq, Jordan, Laos, Morocco, South Africa, Sri Lanka, Tunisia, Uzbekistan, and Vietnam.

The average annual expenditure on food per person was $924 in Bangladesh in 2022 whereas it was $882 in Brazil and $874 in Colombia. Their GDP per capita is more than twice that of Bangladesh, according to an analysis of the CPD.

"We are a lower-middle-income country, yet we are spending more on food. It shouldn't be. What kind of economy do we live in?" asked CPD Research Director Khondaker Golam Moazzem at a media briefing on the state of the economy at the office of the think-tank in the capital.

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Essential prices keep spiralling

Bangladesh has been experiencing higher inflation for nearly two years, exceeding inflation rates in many developed and developing economies. The burden falls heavily on poor and low-income households because of the erosion of purchasing power.

In 2022-23, the average inflation rate was 9.02 percent, far higher than the average of 6 percent in recent years. The Consumer Price Index grew by an average of 9.73 percent in the first 10 months of the current financial year.

In Bangladesh, food prices have remained volatile. In April 2023, food inflation was 9 percent and soared to 13 percent in August last year before slipping to 9 percent in February this year. It went up to 10 percent in April.

This means many households in the low-middle-income nation have been struggling to make ends meet since food costs consist of a much higher share in their total consumption basket.

"Daily essentials have now become luxury goods," said Moazzem.

The CPD analysed the average daily prices of 34 essential food items in Dhaka from January 1, 2019, to May 19, 2024, and found that the price increase ranged between 10 percent and 310 percent.

The price of the fine variety rice has gone up by 17 percent and the medium-sized grain by 15 percent during the five-year period. The price of coarse rice, mostly consumed by the poor, has climbed 30 percent.

"The price of coarse rice has increased more than the varieties consumed by the rich. As a result, businesses are making more profit from the larger segment of consumers," Moazzem said.

Citing its previous reports, the CPD said the price of three common types of rice sold in the markets of Dhaka has been consistently higher than that of Thai and Vietnamese rice.

Similarly, the price of lentils has gone up by as much as 95 percent since January 2019. Loose flour was up 40 percent and packaged flour witnessed a price increase of 54 percent.

The price of unprocessed flour and processed flour has jumped 60 percent and 45 percent, respectively.

According to the CPD, both unprocessed and processed flour started rising in Dhaka before the outbreak of the Russia-Ukraine war.

"This indicates that there may be other domestic causes behind the increase, which warrants a comprehensive investigation by the Bangladesh Competition Commission."

Unrefined soybean oil price shot up by 84 percent to Tk 150 per litre while bottled soybean oil increased by 56 percent to Tk 163.

The CPD said prices in Dhaka's markets are higher than that in the world market. In April, the price of soybean oil in the international market was Tk 105 per litre.

"We don't understand why there is such a big difference in prices, and the inflated prices don't make sense even after considering import duties," said Moazzem.

"There needs to be a probe to see if there is any involvement of big importers or groups which control many segments of the market."

The price of palm oil more than doubled between 2019 and May this year.

The CPD also cited the yawning gap in sugar prices.

In Dhaka, sugar is selling at Tk 130 per kg, an increase of 152 percent from Tk 52 five years ago.

In April, the price of sugar in European countries was Tk 39 per kg while it cost Tk 96 in the US and averaged Tk 50 in the global market.

"We can't comprehend how the price of sugar can rise by 152 percent in five years," said Moazzem.

The price of local and imported onions rose by 164 percent and 167 percent, respectively. Likewise, the price of local garlic shot up by 310 percent, imported garlic by 221 percent, and ginger by 205 percent, according to the analysis.