The Bangladesh Bank will consider slashing the policy rate to 7 percent by March, provided that rampant inflation, which has hovered above 9 percent for nearly two years, eases to 5 percent by then, Governor Ahsan H Mansur said yesterday.
Bangladesh inflation soared (5.86 percent to 11.38 percent in 2022-2024), driven by global shocks and food prices.
Govt must rein in inflation, adopt more business-friendly policies
While stabilising the economy is a priority, the roots of Bangladesh’s recent turmoil lie in a crisis of governance.
The interim government is set to import seven lakh tonnes of rice, the highest in the last seven fiscal years, as it looks to shore up its depleting food grain stock and ease the cost of living crisis for the low- and fixed-income people battered by the prolonged high inflation.
Arrival of winter vegetables contributes to the decline
Many low-income and unskilled workers in Bangladesh’s agriculture, industrial and service sectors are being compelled to reduce consumption as rising inflation eroded their real incomes over the past three years.
Even after the political changeover in early August, the domestic market has been reeling under the influence of oligarchs, according to economist Hossain Zillur Rahman.
Inflation rises to 10.87 percent in October from 9.92 percent in September
Inflation in Bangladesh has reached its highest level in a decade and has been a persistent problem for more than 18 months, starting from early last year.
The green chilli fiasco is not the first such failure to manage the market.
Bangladesh Bank yesterday unveiled a wishy-washy monetary policy for the next six months that will prove to be ineffective in tackling the headwinds passing through the economy.
The ongoing dollar crisis in the country will ease by January next year, said Salman F Rahman, private industry and investment adviser to the prime minister.
Cottage, micro, small-and-medium enterprises (CMSMEs) in Bangladesh are suffering from significantly lower sales at a time when inflationary pressure has pushed up production costs, according to entrepreneurs.
Businesses in Bangladesh went through a tough time in recent months due to a dearer US dollar that pushed up their costs of raw materials and a rocketing fuel bill that contributed to the surge in operating expenses.
Bangladesh made gains in food production and ensured the availability of rice in recent years. But surging inflation, erratic weather, and the Russia-Ukraine war affected the availability of cereals and reduced low-income people’s access to food this year.
Savers are now facing losses on their deposits with banks due to surging inflation, with many solely dependent on interest earnings finding themselves in a tight corner.
People in rural areas were hit harder by food and non-food inflation than those in urban areas over the last two months, with the overall inflation surging to a 10-year high of 9.52 percent in August.
Mismanagement, system loss and a weak supply chain of the Bangladesh Petroleum Corporation (BPC) have become a perennial problem.
