No adequate steps taken to contain inflation: Economists

Economists said the government did not take sufficient measures to tackle inflation and cushion consumers.

During the concluding session of the BIDS Research Almanac, Professor Mustafizur Rahman and economist Ahsan H Mansur pointed out the government's inadequate efforts to curb inflation.

They gave the example of India, where inflation has dropped below 5%, and highlighted the declining prices of commodities in global markets. However, this downward trend is not reflected in Bangladesh, they said.

"Nothing is being said about inflation from the government. It also does not appear to use any tools to deal with it," said Ahsan H Mansur, executive director of the Policy Research Institute (PRI), adding that the  government's inflation control is limited to just saying that if the rice yields, inflation will come down.

He said that the price of food products on the world market has returned to its previous level. Although the price of edible oil has increased slightly in the world market, it has increased by more than 100% here. Such situations prevail in many products, including sugar.

Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue, thinks that the war had an effect on the exchange rate and commodity prices during the formation of the budget for the current financial year.

He said the price of a $20 product rose to $40 at that time. Despite that, the budget has been prepared assuming that the prices of products on the world market and the reserves will remain as before.

The observations made by the economists shed light on the disparity between the government's measures and the prevailing inflationary conditions in the country. 

While acknowledging external influences, they underscored the need for more effective strategies to address inflationary pressures and align with global trends.

Economists believe, although the budget for the current fiscal year was formed several months after the start of the Russia-Ukraine war, its potential impact on commodity prices was not taken into account.

In response, the Bangladesh Bank governor and the state minister for planning defended the situation, attributing the rise in inflation to global factors.

At the programme organised by the Bangladesh Institute of Development Studies (BIDS), Bangladesh Bank Governor Abdur Rouf Talukder said that since July of last year, efforts on to control inflation in coordination between monetary and fiscal policies.

BIDS researchers presented around 20 research papers in various sessions during the two-day event. Mashiur Rahman, economic affairs adviser to the prime minister, spoke as the chief guest at the closing ceremony.

Abdur Rouf Talukder said that it is not possible for the central bank alone to deal with the crisis of the exchange rate, reserves, and inflation.

He said that the ongoing inflation is not due to excess money supply but rather to the increase in prices in the world market. Due to this, inflation is being managed by trying to increase supply while reducing demand.

The governor said that the current fiscal year has seen sales of $12 billion in forex operations. As a result, inflation has been somewhat under control, as over Tk1.10 lakh crore has been mopped up.

State Minister for Planning Shamsul Alam said inflation will come down in the days to come. The main objective of the next budget will be to control inflation and return GDP growth to pre-Covid levels.

Shamsul Alam said that there is concern in the government about inflation, and there will be initiatives in the next budget to control it.

He said that if the price of the product increases for some reason, then the price does not decrease at the same rate. However, he said that the price inflation has been decreasing for two months and that the government is increasing the social security allocation to protect the poor from the pressure of increased prices.

Monzur Hossain, research director of the BIDS, said that the post-Covid recovery, the Ukraine-Russia war, and the increase in import costs due to various reasons have put pressure on the reserves.

He said the taka has depreciated by around 25% against the dollar in the last six months. Exchange rates are linked to the upward movement of inflation. "Because we have to import various products, including food."

BIDS Director General Binayak Sen said that the poverty rate, especially extreme poverty, has decreased in the country in the last few years. Apart from that, the impacts of Covid were not as feared due to good resilience.

He also said inequality is on the rise in urban areas while the poverty rate is decreasing. "Disparity is high in urban areas."

Moreover, despite increasing inclusion in education, there are questions about quality, he added.