As consumers are feeling the heat of rising commodity prices fuelled by global market volatility, the commerce ministry has stepped in to take inventory of imported food items and supplies.
Prices of both food and non-food items rose in the local market in August this year from their July levels, as reflected in the latest inflation figures. Price rallies have continued at retail level since then.
Even though the Bangladesh Bureau of Statistics (BBS) is yet to release its data for September, market prices signal a rising trend in inflation in Bangladesh in line with the global trend.
With almost all commodities on an upward curve in the global price index, Bangladesh's imports – from sugar and edible oil to cooking gas – are becoming costlier, impacting retail prices heavily.
The commerce ministry says crude soybean oil prices have risen in the international market over the past one year, pushing the local market price 43% higher compared to the same period last year.
Similar situations prevail in the sugar and flour markets, seeing year-on-year surge by 27% and 17%, respectively.
The government has fixed the prices of oil and sugar in the local market by reviewing the international market. Even if oil is sold at a fixed price, sugar is being sold at a higher price than the fixed price.
Explaining the recent price hikes of commodities, Abul Bashar Chowdhury, chairman of BSM Group – an importer of consumer goods, said prices of the majority of goods have increased abnormally in the international market. Because importers have to buy products at increased prices, they are compelled to sell them at higher prices, he added.
Commerce Minister Tipu Munshi said efforts are being made to control prices by fixing the prices of products that have the opportunity to do so. However, it is not possible to interfere everywhere, he said, adding such interventions only lead to further complexities.
Ministry blames traders' manipulation for onion price hike
The commerce ministry has held unscrupulous traders in Bangladesh and India responsible for the recent volatility in the onion market.
The current stock of onion in the country is adequate to meet local demands for more than two months, and yet the price of the kitchen staple has soared by Tk25 a kilogram over the past one month owing mainly to price manipulation by a section of traders in Bangladesh and India, Commerce Secretary Tapan Kanti Ghosh told reporters on Monday.
While briefing the media after a meeting with stakeholders to review the prices of consumer goods as well as domestic and international market situations, he said even though the meeting agenda included a number of everyday essentials, onion was the most talked-about.
Hinting at the emergence of a syndicate in onion market, the commerce secretary said onion prices in the country were hiked abnormally on various pretexts – including ban on exports from India and price hike there – at various times in the past three years, although 80% of the domestic demand is met by local farmers. In 2019, onion prices went up as high as Tk300 per kg. In 2020, the maximum price of one kg of the coated bulb was Tk130 and this year it has already touched Tk85 a kg.
The commerce ministry claims the country currently has a stock of five lakh tonnes of onions.
If there is a demand for 25 lakh tonnes of onion per year, then 2.8 lakh tonnes of onion is required every month. In other words, the present stock of onion is enough to meet the demand for more than two months.
Citing the agriculture ministry, the commerce secretary said the early onion harvesting will begin in the country after one month or so. Until then, the prices may remain somewhat unstable, he added.
Speaking on the recent price hike, Tapan Kanti Ghosh said, "Most of the imported onions come from India. But rains in the Indian city of Bangalore and a growing fear that India may suspend onion exports during the September-October lean period have led to some volatility in onion prices."
Traders of the two countries are responsible for this, he said, adding immediate steps taken by the government, however, have helped to bring down the price by Tk5-6 per kg.
Elaborating on the government initiatives, the commerce secretary told the media that the commerce ministry has written to the National Board of Revenue (NBR) to withdraw the 5% duty imposed on onion imports.
"In addition, an initiative has been taken to import onions from Myanmar as an alternative sourcing destination. IPs are being issued to importers promptly. Sales at subsidised prices through the Trading Corporation of Bangladesh are being increased."
Commerce Minister Tipu Munshi expressed his hope that the initiatives taken by the government to facilitate onion imports will bring the onion market under control.
Inflation scare remains
Official data show the inflation in the food sub-sector rose to 5.16% in August from 5.08% a month earlier.
The Bangladesh Bureau of Statistics (BBS), however, claimed that prices of eggs, broiler chickens and some vegetables dropped in August.
But prices of egg and chicken went up in recent weeks, while households will have to pay Tk226 more on a 12-kg cylinder as the government hiked liquefied petroleum gas price on 10 October.
Inflation has been on the rise around the world and central banks have sounded an alarming note that the trend would not fade soon amid soaring commodity prices caused mainly by supply chain strains and post-lockdown surges in demand.
There is a different view too, suggesting that inflation is a one-time consequence of Covid-19 pandemic and would not last long.
Be it short-lived or long-lasting, the cost of living is soaring in most parts of the world.
The World Bank in its recent report said prices of oil and other commodities can rise, leaving possible future inflationary pressures as producers pass high prices to consumers.
The report further said food prices remained on an increasing trend. As a result, the poor in Bangladesh would face food insecurity as food comprise 60% of an average household's consumption expenditure.
The World Bank projected a 5.6% inflation in the current fiscal year and a slightly higher, 5.8%, next year.
Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office, told The Business Standard that as demands for goods and services are increasing with the recovery of jobs and earnings, consumers in the country are at risks of further inflation from the supply side, especially from the external sector.
Bangladesh relies heavily on imports of products like gas, fuel oil, fertilizer, edible oil and food products. If world market prices go up, prices of these products will also increase in the country, he added.
"If prices of gas and liquid fuel go up, the cost of power generation in the country will go up. This will increase the cost of goods," the economist pointed out.
He added rising import expenditure has sent the current account balance on a negative trend. "If this pressure increases further, the local currency may depreciate. As a result, inflation may continue to rise."
Being stuck at home and getting government benefits helped citizens of rich countries save huge amounts over the past 18 months, with Americans amassing $2.5 trillion as of June and European households 540 billion euros by the start of the year, says a Bloomberg report.
Even in Bangladesh, consumers saved Tk1.65 lakh crore in banks in 2020, the highest in the last five years, which reflected that rich people had higher savings owing to limited spending amid lockdowns.
That firepower may help the fortunate few sustain regular spending even if prices go up.
But marginal people are feeling the heat, as a sip of tea with paratha, or a meagre mid-day meal at a roadside stall cost them more today than a month before. Rising prices of sugar, tea, condensed milk, meat, egg, lentil and cooking gas have been passed on to consumers.
Lower output because of broken supply-chains, shipping delays and post-lockdown surges in demand – all contributed to global price hike, making inflation heat felt "across the board".
Global food prices rose to a 10-year high due to higher cost of ingredients such as cereals and oils.
People will have to get used to higher food prices, says a BBC report, quoting international food giant Kraft Heinz which makes tomato sauce and baked beans.
Sayema Haque Bidisha, professor of economics at Dhaka University, said many people have lost their jobs amid the pandemic and their income has stopped. Again, due to the decrease in income for many, they have broken their savings to make ends meet.
She advised to increase the availability of cash to the poor to protect them from the pressure of commodity prices and to take measures to sell goods at subsidised prices.