Inflation hits 8-year high in May

Inflation in May soared to 7.42% – an eight-year high – in Bangladesh, mainly driven by massive increase of prices of food items, reveals a report by the Bangladesh Bureau of Statistics (BBS).

The point-to-point inflation (compared to the same time of last year) was 6.29% in April, registering a 1.13 percentage points increase in a single month.

Food inflation stood at 8.3% in the last month, a jump by 2.07 percentage points from April, while inflation for non-food items fell by 0.31 percentage points in the same period.

The time series data of the BBS found 7.48% inflation in April 2014 led by 9.09% food inflation.

The BBS published its May issue of the "Consumer Price Index (CPI), Inflation Rate and Wage Rate Index (WRI) in Bangladesh" on Sunday, which showed the moving average inflation in the last 12 months (Jun 2021-May 2022) at 5.99%, significantly higher than the previous year's average 5.59% and also higher than the budgetary target of 5.50% for the current fiscal year.

Experts and economists expressed concern over the rising trend of inflation, especially rising price of food items during the harvesting season of Boro paddy.

They are projecting further inflation in the coming months due to a shortage of food, lower food purchase by the government, a volatile international market and the recent price hike of natural gas.

Economist Dr Ahsan H Mansoor said as the harvesting of Boro paddy, the biggest crop season, was not yet over, food inflation had become a major cause of concern.

He said the price of food will go up further in the future as the expected food procurement of the government has not been reached.

Ahsan H Mansoor, the executive director of the Policy Research Institute, said the extent of crop damages caused by floods, droughts and natural disasters could not be ascertained this time, with the Aman paddy also at risk of being affected.

All in all, apart from ensuring quick rice import at the government level, he also recommended simplification of rice imports at the private level.

The BBS found 7.94% inflation in rural areas in the last month, which is 1.35 percentage points higher than the April rate of 6.59%.

Food inflation in rural areas increased by 2.2 percentage points and stood at 8.84% in May. Non-food inflation reduced by 24 basis points and stood at 6.26%.

Urban Areas observed 6.49% inflation in May, or 0.74 percentage points higher than in April. Food inflation in urban areas increased by 1.77 percentage points and stood at 7.08% and nonfood inflation dropped by 40 percentage points, coming to 5.85%.

At a press conference organised by the Citizen's Platform for SDGs, it was said that rice is being sold at a price of at least Tk10 per kilogrammes more in Bangladesh than in India.

The government had imposed a 62.5% tariff on rice imports and a 34% duty was levied on various fuels, including LNG and oil.

The conference suggested that inflationary pressure be reduced by lifting tariffs at the import level.

Professor Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue, said the inflation data reflected the consequence of the devaluation of the taka against the dollar, inflation in the international market, quantity and cost of materials locally and transportation costs.

He said the data did not reflect the real cost of living for the poor and lower middle class. "If we calculate the cost of their daily commodities, inflation will be even higher," he said.

He urged for increasing the purchasing power of the people by creating income generating activities in the medium term.

The BBS measure also indicated that the cost of living increased in the last 12 months. A set of products and services which cost TK100 in the last year now costs TK107.42.

The BBS also found 6.38% wage growth in May, which was lower than the inflation, indicating the real income or purchasing power of wage earners has reduced.