Food inflation almost doubles in 12 months

Food inflation almost doubled in the month of March, spurred by rising prices of various essentials including rice, which went on to affect the poor and fixed-income groups, particularly in rural areas.

In March, food inflation stood at 6.89 percent, up from 3.89 percent from a year earlier and 6.84 percent from February, according to data released by the Bangladesh Bureau of Statistics yesterday.

“The rise in food inflation reflects the large increases in rice prices,” said Zahid Hussain, lead economist of the World Bank's Dhaka office.

The reasons for the rice price spiral were the increased tariff on rice imports, decline in public rice stock that limited the government's ability to counteract price gyrations through market-based interventions, and production losses due to early flash floods in haor areas.

In fiscal 2016-17, the government hiked the import duty on rice from 10 percent to 25 percent.

Rice stocks at public warehouses stood at 4.90 lakh tonnes at the end of March -- down 43.7 percent from a year earlier, according to data from the food ministry.

However, overall inflation declined in March to 5.39 percent from 5.65 percent a year earlier because of a fall in non-food prices.

The inflation data comes at a time when the prices of various essentials, mainly rice, have risen to new level, hitting the poor and fixed income groups.

The monthly average retail prices of coarse rice, which was Tk 35.84 each kg in January in Dhaka this year, rose to Tk 37.50 per kg in March. In February, it was Tk 37, according to Food and Agriculture Organisation.

Overall inflation has been creeping up since December last year. Inflation rose to 5.31 percent in February from 5.15 percent in January this year, according to BBS.

While unveiling inflation figures, Planning Minister AHM Mustafa Kamal said the food price increase is 'temporary' for crop losses. “But we will not give scope to traders to hike the prices of rice,” he said, adding that the government is in the process of importing 2 lakh tonnes of rice.

“How much crops were lost? 2 lakh (tonnes)? 4 lakh (tonnes)? It's not more than that,” he added.

The agriculture ministry estimates the rice losses from flash flood and blast would be 7.5 lakh tonnes, said an official.

However, consumers were given a respite from rising costs by way of non-food items.

Non-food inflation slumped to 3.18 percent in March from 8.36 percent a year earlier. But it has risen from 3.07 percent in February this year, shows BBS data.

“The across-the-board decline in non-food inflation is attributable to weakening of demand resulting from a big decline in remittance income and slow credit growth, while the cost-push factors remained largely contained,” Hussian said.

He said the headline inflation is pretty much within the range of monetary policy target.

But, there is no room for complacence as signalled by the slight increase in non-food inflation in March relative to February and the sharp increase in food inflation from the second quarter of the current fiscal year, the WB economist added.