Editorial
The inflationary challenge
Time to think of a containment strategy
Bangladesh Country Director of ADB Hua Du and World Bank Country Director Zhu Xian voiced their concern over increasing inflationary pressure being endured by the Bangladesh economy. From two different forums -- the ADB releasing its Bangladesh quarterly economic update and the World Bank director speaking at an AmCham meeting -- they put out a call to Bangladesh government to tame inflation. From a very consistently low inflation rate from 2001 to 2005 it increased to 6.8 per cent in July 2006 followed by a leap up to 7.4 per cent in March 2007. The ADB has now revised its earlier projection on inflation from 7 per cent to 7.2 per cent for the current fiscal. Our cost of living is primarily indexed to the food basket. Coarse rice, which used to sell at Tk 15-16 per kg is now being bought at Tk 22-25. Lentil is selling at Tk 75 per kg. The acceleration in food inflation is put down to higher foodgrain prices in both the domestic and international markets, reduced imports and lower domestic production of cereals. Aus output has gone down by 13.7 per cent and the aman recorded a fall this fiscal compared to that in the last fiscal. Boro crop is estimated at 14. 5 million tonnes, higher than the output in FY 2006. Basically, the food prices will have to be reduced to contain the inflationary pressure, which is teetering close to a two digital figure. Obviously, the increasing international commodity prices coupled with the percolatory effects of the rising oil prices are beyond our control but what lies within our power to do is to put in place a supply and distribution mechanism that can keep the food prices within a tolerable range. There can be safety net programs for the poor as suggested by Hua Du and government intervention by way of offtakes from its godowns to stabilise the food market. The BDR fair price sale centres provided some relief to the urban consumers but they were far from enough to cater to the countywide demand for the daily necessities. The recent drive against hoarding, restriction on trucking of foodgrains beyond 5 tonnes and some administrative efforts to control prices of essentials have contributed to a supply crunch. We have to take recourse to better fiscal management now. Reduction in tariffs as envisaged in the new import policy should be of help on the supply side. But basically revenue collection continues to be disappointing risking higher government borrowing which could lead to credit squeeze on the private sector eventually affecting productivity. The issue needs to be addressed in earnest.
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