Higher government borrowing from the central bank is also a big reason for increased inflation, the Consumer Association of Bangladesh (CAB) on Thursday said.
"The excuses of the Russia-Ukraine war and the Covid-19 pandemic for price hikes in the local market are not completely true. Higher government loans from the central bank to meet budget deficits are also a major cause of inflation," CAB President Ghulam Rahman said at a virtual press conference on the price situation ahead of Eid-ul-Adha.
In the 11 months of FY23, the government has taken record Tk70,000 crore in loans from the Bangladesh Bank, which has a great impact on the market, he added.
"Economists say that the effect of the loan taken from the central bank is fivefold when it comes to the market, which means that the Tk70,000 crore is returning as Tk3.5 lakh crore and triggering inflation."
According to the latest report from the Bangladesh Bureau of Statistics, the monthly inflation rate in May soared to a decade-high of 9.94%, up from 9.24% in the previous month. The surge in the inflation is higher than the 7.32% growth in wages in May, the statistical agency also revealed, indicating the hardship for fixed income earners.
"Different countries have taken various measures such as reining in government expenditure and controlling interest rates to fight inflation, but Bangladesh has failed to do so. Our central bank has taka printing machines, and it abused those for providing loans to the government. It also failed to fight inflation with the 6%-9% interest rate cap," Ghulam Rahman stated.
Criticising inflation gauging systems, he pointed out that most of the goods and services the government takes into consideration for calculating inflation are not used by common people. Mass people are concerned about the prices of necessary 50-60 items.
The CAB said the prices of daily essential products are on the rise around the Eid-ul-Adha, but there is a lack of market monitoring by the government agencies.
"Like previous times, essential item markets have now become unstable. The prices of soybean oil, onion, garlic, cumin and other spices are on the rapid rise. Although various government institutions are working to control prices, the impacts of these efforts are not visible in the market," CAB General Secretary Advocate Humayun Kabir Bhuiyan said.
Regarding the price of oil, he said, even if the price is reduced, it does not show an impact on the market. Sugar is also sold at much higher prices than the government-set rate, he noted.
The CAB put forward 12 recommendations to control price hikes. The key suggestions are displaying price lists in wholesale and retail markets, monitoring the supply chain of daily necessities, taking strict steps to manipulate import, wholesale and retail prices and making exemplary actions for hoarding.
Collaboration among agencies and their modernisation are also crucial, it added.