Inflation in Bangladesh, as in the country itself, is on the rise. Per capita income increased by 11% to $2,591 from an estimated $2,554 for FY 2020-21. But at the same time, inflation rose from 5.29% in December 2020 to 6.05% in December 2021, according to the Bangladesh Bureau of Statistics (BBS). Non-food inflation hit a six-year high in December 2021 at 7%, followed by a rise in diesel and kerosene prices in November. Soaring prices for basic necessities have put ordinary people – middle-income, lower-middle-income and low-income groups, as well as the new poor – in a difficult situation, drastically reducing their ability to cover their monthly expenses. essential.
In the midst of an ongoing nightmare for the majority of the population, there is talk of another few notches in utility prices, especially given the rising prices in the international market. Petrobangla has sent a proposal to the Bangladesh Energy Regulatory Commission (BERC) to raise retail gas prices by nearly 100%, while Bangladesh Petroleum Exploration and Production Company Ltd (Bapex) has suggested a 48% hike. If Petrobangla’s proposal is approved, consumers will have to pay around Tk 20 per cubic meter of gas, as opposed to the current price of Tk 9.80.
Meanwhile, Dhaka Wasa recently proposed a 20% water tariff hike to bridge the gap between production costs and the price of water. If approved, the hike will be effective from July 1, 2022.
The rise in essential prices is cause for concern, but what is even more worrying is the rise in the prices of public services, because the impact of these price rises affects all spheres of life – from basic utility bills that one has to pay, to the cost of producing locally produced goods, to import costs, to food prices in kitchen markets, to transport costs. They will create a ripple effect throughout the economy, exacerbating public suffering.
The government also apparently faces a dilemma over rising fertilizer prices, which will have a direct impact on food inflation and farmers’ livelihoods.
But how to overcome this crisis?
“Given the current reality of this commodity price shock hitting us in the midst of a pandemic, there are four aspects to consider,” said former World Bank chief economist Dr. Zahid Hussain, while discussing solutions with this writer. “First, the government needs to assess whether it will pass the extra expense on to the people or fund it itself. Second, if the government decides to adjust commodity prices, then we need to consider how the adjustment would be made.: what is the formula and whether the adjustment would be in line with international rates. There should be full transparency in this regard. Thirdly, with regard to oil prices, in particular, in the past , when the price of fuel was lower in the international market, prices were not realigned in Bangladesh, on the pretext that the BPC could take the opportunity to recoup the losses it had suffered in the past. this is the case, the BPC should now be able to absorb the current shock.
“Finally, the government needs to focus on the prioritization of subsidies. It needs to look at where subsidies benefit the masses and where subsidies benefit certain groups. For example, at the start of the pandemic, the government allocated a plan of stimulus of Tk 40,000 crore for large industries and the service sector, to be disbursed by commercial banks in the form of working capital loans at an interest rate of 9%, of which 4.5% was borne by the beneficiaries and the remaining 4.5% by the government as a subsidy In the context of the current rebound in the economy, the government can now reassess the impact and the necessity of this 4.5% subsidy on the plans of revival of major industries and, if deemed appropriate, channel some of the funds to cover rising commodity prices,” he said.
Moreover, before considering any commodity price adjustment, the government must address the system’s losses in the utility sector and eliminate the irregularities for which this particular sector is so notorious. In addition, the government should also address the problem of energy overcapacity, which is draining money. According to the media, in 2020-21, around 60% of the installed capacity remained unused, resulting in an avoidable expenditure of Tk 13,200 crore, which had to be paid to the rental power plants as a capacity charge. On the contrary, it is an example of reckless mismanagement of public funds and resources.
Given the current scenario – where queues are only getting longer in front of TCB trucks selling essential goods at discounted prices – policymakers, bureaucrats and relevant stakeholders, including economists, need to gather and consider all possible options to make the situation bearable for ordinary mortals. We do not want our people to resort to desperate measures to make ends meet.
The pandemic has not only taken direct casualties but also driven some to commit suicide out of desperation as they failed to provide for their loved ones. We will remember the case of Khokon Hossain, 26, from Rajshahi, who committed suicide last July after losing his job during the confinement. There are many like Khokon Hossain who are finding it increasingly difficult to survive in these trying times. In the midst of all this, the government cannot and should not make people more vulnerable by exposing them to higher inflation.
This is an issue that government and policy makers need to take seriously. People cannot be hung to dry.
Tasneem Tayeb is a columnist for The Daily Star. His Twitter handle is @tasneem_tayeb