The walls are closing in on the lower-income people

Inflation in Bangladesh, like the nation itself, is on the rise. The per capita income saw an 11 percent rise to USD 2,591, from an estimated USD 2,554 for 2020-21 fiscal year. But at the same time, inflation spiked from 5.29 percent in December 2020 to 6.05 percent in December 2021, according to the Bangladesh Bureau of Statistics (BBS). Non-food inflation reached a six-year high in December 2021, at seven percent, followed by a hike of diesel and kerosene prices in November. The skyrocketing prices of essentials have put the common people—middle-income, lower-middle-income and low-income groups, as well as the new poor—in a tight spot, significantly curtailing their ability to cover their monthly essential expenses.

In the midst of an ongoing nightmare for the majority of the population, there are talks of utility prices going up a few notches again, especially in view of rising prices in the international market. Petrobangla has sent a proposal to Bangladesh Energy Regulatory Commission (BERC) to increase gas retail prices by nearly 100 percent, while Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) has suggested a 48 percent hike. If the Petrobangla proposal is approved, consumers will have to pay about Tk 20 per cubic metre of gas, as opposed to the current price at Tk 9.80.

Meanwhile, the Dhaka Wasa recently proposed a 20 percent hike in water tariff to meet the gap between production costs and the price of water. If approved, the hike will be effective from July 1, 2022.

The hike of essential prices is a cause for concern, but what is even more worrying is the rise of utility prices, as the impact of these price hikes cascades down to every sphere of life—from basic utility bills one has to pay, to the production cost of locally manufactured goods, to import costs, to prices of food items in the kitchen markets, to transportation costs. They will create a ripple effect across the economy, exacerbating public suffering.

The government is also apparently in a dilemma over increasing fertiliser prices, which will have a direct impact on food inflation and the livelihoods of farmers.

But how can we wade through this crisis?

"In view of the current reality of this commodity price shock hitting us in the midst of a pandemic, there are four aspects to consider," said former World Bank lead economist Dr Zahid Hussain, while discussing solutions with this writer. "First of all, the government needs to assess whether it will pass on the additional expense to the people or finance it itself. Secondly, if the government decides to adjust commodity prices, then we would need to look at how the adjustment would be done: what the formula is and if the adjustment would be in line with the international rates. There should be complete transparency in this. Third, with regards to petroleum prices especially, in the past when fuel price was lower in the international market, the prices were not realigned in Bangladesh, with the justification that the BPC could utilise the opportunity to recover the losses it had shouldered in the past. If that is the case, the BPC should now be in a position to cushion this current shock.

"Finally, the government needs to focus on subsidy prioritisation. It needs to look at the areas where subsidy is benefitting the masses, and where subsidy is benefitting certain groups. For instance, at the onset of the pandemic, the government allocated a stimulus package of Tk 40,000 crore for large industries and the service sector, to be disbursed by the commercial banks as working capital loans at nine percent interest rate, of which 4.5 percent was shouldered by the beneficiaries, and the remaining 4.5 percent by the government as subsidy. In the context of the current rebound of the economy, the government can now reassess the impact and necessity of this 4.5 percent subsidy on stimulus packages for the large industries, and if deemed appropriate, channel some of the funds to cover the price increase of commodities," he said.

Moreover, before considering commodity price adjustment, the government needs to address the system losses in the utility sector and root out irregularities that this particular sector is so well-known for. In addition, the government should also look into the power overcapacity problem, which is draining money. According to media reports, in 2020-21, about 60 percent of the installed capacity remained unutilised, leading to an avoidable expense of Tk 13,200 crore, which had to be paid to the rental power plants as capacity charge. If anything, this is an example of reckless mismanagement of public money and resources.

Given the current scenario—where the lines are only getting longer in front of the TCB trucks selling essentials at discounted prices—the policymakers, the bureaucrats and the relevant stakeholders, including the economists, need to come together and consider all options possible to make the situation bearable for the common people. We do not want our people to resort to desperate measures to make ends meet.

The pandemic has not only claimed lives directly, but has also pushed some to take their own lives in desperation, as they failed to provide for their loved ones. One would remember the case of 26-year-old Khokon Hossain from Rajshahi, who committed suicide in July last year after losing his job during the lockdown. There are many like Khokon Hossain who are finding it increasingly difficult to survive in these trying times. Amid all these, the government cannot and should not make the people more vulnerable by exposing them to higher inflation.

This is an issue that the government and policymakers need to take seriously. The people cannot be hung out to dry.

Tasneem Tayeb is a columnist for The Daily Star. Her Twitter handle is @tasneem_tayeb