A perfect economic storm is upon us
We are deeply concerned with the state of the middle- and lower-income people of the country, who are having to delve deeper and deeper into their savings, as their daily financial struggles continue to pile up without any end in sight. The majority of these people were hit extremely hard, first, by the Covid-19 pandemic, and then, by the consequences of the Russia-Ukraine war – not to mention the endless government corruption and wastage that have continually eaten away at their hard-earned incomes and benefits.
Reportedly, as commodity prices spiralled out of control and remain astronomically high, people with fixed incomes in particular have resorted to breaking their savings certificates and selling off the shares they owned, at a loss, just to make ends meet. Inflation in Bangladesh, even according to the government's own statistic – which many have argued is lower than the actual figure – now stands at a nine year high of 7.56 percent. At the same time, people's savings are decreasing. In the 2019-20 fiscal year, the national savings rate stood at 27.08 percent. In the last fiscal year, that came down to 21.56 percent. As the national savings rate is an indicator of a nation's economic health, the current trend clearly indicates that our economic health is getting worse and worse.
The lack of job creation and income generating opportunities are additional concerns – which were there even before the pandemic – that are only piling on more misery on people. And at a time when prices are showing no signs of coming down, in the absence of new (or enough) income, people are being forced to spend out of their savings faster. But what will happen when the middle and lower-income people end up spending all their savings? Many have already cut down their consumptions, in some cases, to the bare minimum. Therefore, cutting down on their consumptions further may not even be an option for many.
Since the government lowered interest rates during the pandemic, and is yet to adjust them according to the new economic reality, people with fixed income are being hit doubly hard – as the value of their bank deposits continue to go down due to high inflation compared to low interest earnings. The declining trend in deposit growth across banks confirms this.
The government needs to recognise that ordinary people are feeling a much greater brunt of the crisis than government officials have so far admitted to. And this only adds further insult to their sufferings. Thus, it should immediately look to bring prices under control, through better market monitoring and more efficient supply chain management. Additionally, it should consider adjusting the inflation rate in accordance with the new reality we are in, temporarily withdraw taxes on savings instruments and, most importantly, look to cut down on the enormous amount of corruption and wastage that have become the hallmarks of our governance system.