Non-food inflation: a runaway train
Non-food inflation has been unbridled since the government hiked diesel and kerosene prices two months ago, touching 7 per cent in December, a six-year high, pounding consumers.
The higher inflation is particularly painful for a majority of households in Bangladesh as the cost of living has gone up owing to the sharp rises in the non-food inflation as well as an elevated level of food inflation.
Owing to a 13-basis points month-on-month surge in December and 39 basis points in November, the non-food inflation reached almost the levels of December 2015, when it was 7.05 per cent, data from the Bangladesh Bureau of Statistics showed yesterday.
It was 6.48 per cent in October last year, meaning it went up by 52 basis points since the government raised the price of diesel and kerosene by 23 per cent, the biggest jump in a decade, in the first week of November.
The move prompted the public transport operators to call a countrywide strike, forcing the government to increase the bus fare by as much as 28 per cent and launch fares by up to 43 per cent in order to appease the operators.
As a result, it sent the general inflation above 6 per cent as the Consumer Prices Index (CPI) rose to a 14-month high of 6.05 per cent in December from November's 5.98 per cent. General inflation was 5.7 per cent in October.
Food inflation is also at a higher level for the elevated commodity prices, fueled by supply constraints, pent-up demand and unprecedented shipping costs.
It was up three basis points at 5.46 per cent in December, the highest in six months, after increasing 21 basis points in November.
Supply chains have been gummed up by robust demand as economies emerge from the Covid-19 pandemic, thanks to more than $10 trillion in global economic stimulus. The coronavirus pandemic has caused a global shortage of workers needed to produce raw materials and move goods from factories to consumers, Reuters reported.
According to Prof Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue, several factors were at play for the rise in inflation.
The first one is imported inflation: global prices, influenced by oil price hike in the international market, have pushed up the costs of imported products.
There is also an influence of the exchange rate fluctuation, said Prof Rahman.
The taka has lost significant value against US dollars, owing to rocketing imports, moderate exports and slowdown in remittance flow, making imports costlier.
"The failure to manage properly was also responsible for the soaring inflation. As a result, consumers had to buy products at higher prices," said Rahman.
"Using oligopolistic power, intermediaries manipulate prices from the import stage to the retail stage in the case of imported commodities, and from the farm gate to the retail stage in the case of domestically produced commodity."
The higher inflation also reflects the fuel price hike and its impact that has been overwhelming since it is involved with the production cost of various products and the transport cost, according to the expert.
Inflation is unlikely to cool down very soon.
An internal study of the finance ministry found that inflation would be on an upward path for three to four months after the fuel price hike, said an official of the ministry.