Inflation in June reached 7.56% – a nine year high – amid a volatile international market triggered by the Russia-Ukraine war, according to the statistics bureau, as food prices are rising at a higher rate than non-food items and rural people are paying more than urban ones.
According to data released on Tuesday by the Bangladesh Bureau of Statistics (BBS), prices of both food and non-food items ticked up in June. Food prices kept rising to 8.37% in June as the rate in the previous two months was at 8.30% and 6.23%. Prices of non-food consumer items surged to 6.33% from May's 6.08%.
The 7.56% inflation means people had to spend more than Tk107 to buy the same product or service in June this year which was at Tk100 in the corresponding month last year.
The pace of price rise was more in rural areas than in the cities as rural districts witnessed 8.93% food inflation in June – more than 7.11% in urban areas.
BBS data showed the highest 7.85% general inflation was in July 2013.
Inflation has been on the rise since late-2021 as the global economy rebooted by shaking off the pandemic fallout. Fuel and food prices around the world started to rise after the war in Ukraine started earlier this year. It affects other products as well.
In this situation, Bangladesh inflation has been more than 6% for eight consecutive months – putting pressure on the lower and middle-income families to meet their daily expenses. Food prices have increased the most.
Ahsan H Mansur, executive director of the Policy Research Institute (PRI) of Bangladesh, said Russia-Ukraine war fallout has pushed up all the commodity prices in the global market, and many countries are facing inflationary woes.
"There is nothing surprising for Bangladesh. But now the question is what policies are being taken up in our country to tame the rising prices," he said.
Noting interest rate hike in other countries to tame the inflation, the PRI executive director said, "The uniform interest rate, which is still unchanged, leaves the inflation curbing in uncertainty."
"To slow down the pace of price rise, we must raise the interest rate. But we are yet to do that," Ahsan H Mansur noted.
He also expressed doubt about the BBS inflation data as those, he said, do not match global price rise statistics.
The general inflation in June last year was 5.64%, while the moving average inflation of the just concluded FY2021-22 was 6.15%, according to BBS data released Tuesday. The overall inflation in May this year was 7.42%, which crossed the 7.50%-mark just next month.
Professor Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue (CPD), said high inflation hit the marginalised and the middle-class most as food inflation is more than what the BBS has reported.
"Limited income people are drastically losing their purchasing power," said Prof Mustafizur. He said if the fuel subsidies are re-adjusted as per the suggestion by the Dhaka visiting International Monetary Fund (IMF) team, the pressure on people with limited-income would compound.
"There will be pressure in the coming months for wage hikes. The inflationary pressure will further complicate the overall economic situation," he added.
Food inflation to elevate social risk: Moody's
Food security has become a major concern for governments in the Asia-Pacific as the Russia-Ukraine military conflict continues to disrupt supply and raise the cost of agricultural products, says Moody's Investors Service, warning that food shocks could increase social discontent and trade protectionism.
In a report released in Singapore on Tuesday, the rating agency's analyst Deborah Tan said, "Food inflation will elevate social risks across the region, with Bangladesh, Cambodia, Pakistan and Laos having the highest social risks."
Policy responses to recent price shocks will have long-term credit implications for sovereigns and some corporates, the report warned, noting high energy and food weights in consumer price indexes of countries like the Philippines, India, Thailand and Vietnam.
For governments, many of which have less fiscal space post-pandemic, compensating for domestic food price increases will entail fiscal costs and the pace of fiscal consolidation will likely slow as spending pressures persist, it said, calling for targeted subsidies to consumers and agricultural subsidies to ensure food security and political stability.