Rural food inflation hit 15% in Dec: study

Food inflation remained at around 15 percent in rural areas in December last year, which was much higher than the overall inflation rate in Bangladesh, according to a new study conducted by the Bangladesh Institute of Development Studies (BIDS).

The national food inflation rate in the same month stood at 9.58 percent, according to the Bangladesh Bureau of Statistics (BBS).

"The key driver contributing to higher inflation was the price of fish. It increased by 20 percent while poultry prices were second in the list," Binayak Sen, director general of BIDS, said yesterday.

The institute independently conducted the study recently across all 64 districts. The study compared a food basket, targeting poor people, with data from previous years.

The BBS also releases a monthly consumer price index, which covers 383 items, with 749 varieties of goods and services.

Sen said a large portion of poultry and fish feed is dependent on imports and prices of imported feed increased several-fold over the past two years, which contributed to the rise in the rate of inflation.

"The duty on poultry feed needs to be reduced or removed," he suggested.

Sen also urged the government to withdraw export incentives immediately as US dollars have become much pricier and instead use the money for low-income groups.

As the real wages to the agricultural and garment workers have declined significantly, the government should increase the coverage of the social safety net during this disastrous time through rationing," he said.

Sen made these remarks at a book launching event, titled "Stabilizing the Macroeconomy of Bangladesh", at the BIDS office in Agargaon.

The book was written by Sadiq Ahmed, an economist and vice-chairman of the Policy Research Institute. Mashiur Rahman, economic affairs adviser to the prime minister, was present as chief guest.

"Even with the best lending decision, some loans may get distressed owing to unanticipated deterioration of market conditions. There is an element of this, but most of the non-performing loans (NPLs) and rescheduled loans in Bangladesh are caused by poor governance," Ahmed said.

He added that without addressing the NPL problem, it would be hard to think of any sustainable solutions for the stock market.

Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM), said the banking sector is not really functioning efficiently.

He added that almost all state-owned banks were unhealthy, like many private banks.

"So, our entire banking sector is becoming sicker day by day. We must work together through proper coordination between monetary and fiscal policies," Mujeri said.

Manzur Hossain, research director of BIDS, said Bangladesh finally started some sort of reforms with smart moves to adopt the crawling peg and hike the policy rate.

"Now, the market will determine a rate that clients can accommodate. It was a welcome move," he added.

He also said issues surrounding the interest rate and current account were related to the exchange rate.

"So, if coordinated approaches are made, we will get a good situation without import control," Hossain added.

MA Mannan, chairman of the planning ministry's standing committee, blasted loan defaulters.

"You always speak in a soft tone. That's good. But those who are defaulting on loans and withdrawing money from banks in broad daylight, why not call them robbers directly? Robbers must be called robbers," he said.

Mannan also opposed the proposal to form a banking commission, saying it would have little effect.