Inflation slightly drops to 9.63% in September
Since last March, inflation has consistently remained above 9%, significantly affecting the cost of living, particularly for the low-income groups
Inflation in September slightly decreased to 9.63%, but economists say the suffering of ordinary people will not be significantly alleviated given the current market conditions.
The general inflation in August was 9.92%.
According to the Bangladesh Bureau of Statistics (BBS) data released on Tuesday, food inflation also fell to 12.37% from 12.54% in August, highest in over a decade. Non-food inflation also eased to 7.82%.
Since last March, inflation has consistently remained above 9%, significantly affecting the cost of living, particularly for the low-income groups.
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Apart from the improvement in inflation, the country also experienced an increase in wage rate up from 7.58% in August to 7.64% in September.
Economists attributed the persistently high inflation to internal factors, describing it as largely man-made.
These factors include the availability of cheap credit, market manipulation by vested interest groups, weak monitoring mechanisms, deteriorating macroeconomic fundamentals, and issues within the banking sector and money market.
Economists called for a rapid adjustment of the exchange rate, and for the government to address weaknesses in the market system and ensure that unscrupulous traders cannot destabilise the market.
Dr Mustafa K Mujeri, former director general of the Bangladesh Institute of Development Studies (BIDS), said that while inflation has slightly decreased, it remains abnormally high.
He criticised the government's price controls on eggs and potatoes, saying that they have not had any meaningful impact on the market.
He also argued that the government's monetary policy, which has involved borrowing heavily from the Bangladesh Bank to meet the fiscal deficit, is not helpful in reducing inflation. Printing new money, he said, only serves to fuel inflation further.
Dr Mustafa K Mujeri said inflation is driven not only by demand, but also by supply-side factors, such as import prices, exchange rates, and the value of the taka.
He said that the government must work together on all fronts to control inflation.
Dr Selim Raihan, economics professor at the University of Dhaka and executive director of the South Asian Network on Economic Modeling (Sanem), said that the government's measures to reduce inflation are not having the desired effect. Inflation has remained above 9% for an extended period of time, and food inflation has exceeded 12%.
High inflation, particularly food inflation, is having a significant impact on the poor and middle class, he said.
"If the government had taken earlier action, we could have reaped some benefits. Monetary policy in particular has been ineffective in reducing inflation. There was an opportunity to reduce the prices of some products in the market by changing the tax policy and lowering import taxes," he added.
However, no action has been taken against traders who arbitrarily raise prices in the domestic market. Market supervision has been inadequate, Dr Selim said.
He noted that many countries including Indonesia, Vietnam and Sri Lanka have been able to take timely measures to reduce inflation and bring it under control.
Low wage growth
Data released by the Bangladesh Bureau of Statistics shows that while inflation fell by 0.29 percentage points in September, wage growth was a mere 0.06 percentage points.
The highest wage growth, month-on-month, was experienced in the industry sector, where it rose from 6.90% in August to 7.12% in September.
For those in agriculture and service, the rise barely registered – from 7.89% in August to 7.91% in September and 8.10% in August to 8.12% in September respectively.
Mehraj Ahmed, a private service job holder in Dhaka, is one of many to have seen the changes rising inflation can have when the needle on earnings refuses to budge.
"I lived in a two-bedroom house in Azimpur. Then, I moved to a one-room as a paying guest to cope with the expenses. Inflation may have fallen last month, but I felt nothing honestly," he said.
One of the biggest changes Mehraj made was to his lifestyle.
"You know, now I am very careful about eating out. I had to eat out today and my bill was Tk100. Previously, the same meal would have cost half. My expenses have increased, but my salary hasn't, so it's all about adjustments and compromises now," he said.
