The latest figures on inflation, especially food inflation, are alarming indicators that reconfirm that people from lower and lower-middle-income groups are going through extreme financial hardship. With inflation hitting 11.38 percent—a four months high—and food inflation soaring to 13.8 percent (in urban areas it is 14.63 percent), putting food on the table has become a huge challenge, especially for the poor. This is despite the government tightening the monetary policy and lowering import taxes on essential items. In such a crisis, the government must come up with urgent measures to provide some relief to ease the burden. The suggestions made by various economists must be given importance in order to find a way out of the crisis.

One of the reasons given by economists for the high inflation despite a stringent monetary policy is the central bank's printing of high-powered money to provide liquidity support to distressed banks and protect depositors. Because of the creation of new money, further inflationary pressure is being exerted on the market.

Read more

An anatomy of the current economic situation in Bangladesh

In this situation, the government, as suggested by economists, must adopt simultaneous strategies to bring prices under control. The first task is to identify the factors that are driving food prices up. While the supply of rice and vegetables took a big hit during the floods in August, there are other factors that are also at work. For example, due to the continuation of extortion in the supply chain, prices of goods are getting inflated by the time they reach the market. Additionally, the market is still controlled by a few, and collusion in wholesale markets persists, which is another factor that is driving up prices.

Read more

‘Administered prices don’t work’

The multi-pronged approach suggested by economists includes better policing of extortion in the supply chain, fostering more competition in the market, and clamping down on wholesalers' collusion to hike prices. The number of Trading Corporation Bangladesh trucks providing subsidised food items must be increased significantly to meet demand, with distribution carried out in a more systematic manner. Improved coordination between the Bangladesh Bank, the National Board of Revenue, Commerce Ministry, and the Bangladesh Competition Commission is also essential.

Inflationary pressures ripple through all aspects of the economy and aggravate social problems such as crime. As such, government control over the prices of essential items must be treated as the most urgent task at hand. It goes without saying that, given the tremendous inflationary pressure people have been suffering for almost two years, their standard of living continues to deteriorate. Unless the government finds an urgent solution to the inflationary crisis, the spillover effects on the rest of the economy will lead to even greater concerns down the line.