PRICES of most food items have remained unusually high for a couple of years. Low- and middle-income people mostly suffer because of increase in goods prices. They survive on credit or cut down on goods purchase. A reason that prompted the people to put their weight behind the Students Against Discrimination in July and August was high prices of most goods. They vented their pent-up anger against the soaring prices of most food items by joining the movement that they had felt was their last opportunity to topple the authoritarian government. But they are now utterly disappointed because prices of most food items have surpassed records. Prices on the international market, however, came down in 2023, which has no reflection on the domestic market. Although several developed and developing economies and, even, a troubled economy such as Sri Lanka could tame inflation through appropriate policy measures, Bangladesh is still caught in high inflationary waves.
As of November, inflation in Bangladesh was 11.38 per cent point-to-point and 10.22 per cent in monthly average. Households are reducing expenditure on food and non-food items, to face the inflationary pressure, changing their patterns of food consumption, acquiring second jobs, drawing from their savings and borrowing from formal and informal sources, among other emergency measures. It is, therefore, not surprising that inflationary pressure may push some 鈥榲ulnerable鈥� households below the poverty line. In this context, the Macro Poverty Outlook of the World Bank estimated that price increase may have pushed as many as five lakh Bangladeshis into extreme poverty, defined as sustenance on less than $2.15 a day, with purchasing power having been adjusted, also known as the international poverty line. It was also projected that 8.4 lakh people would become moderately poor, living on less than $3.65 a day, with purchasing power having been adjusted.
According to the World Bank, both inflation and foreign exchange crises would contain private demand, on the one hand, and would constrain private investment and job creation, on the other hand. Both are expected to put pressure on low-income people, leading to a higher rate of poverty. In understanding the impact of inflationary pressure on household-level poverty, it is noteworthy that as people from low-income groups tend to spend a greater proportion of their income on food items, in the face of high food inflation, they could be the worst sufferers. Consequently, their level of deprivation can worsen while some non-poor might fall below the poverty line. Along with high poverty, high prices also lead to inequality within and among countries. Although the World Bank report forecast inequality to remain stagnant, it is already high and increasing over time. The Gini co-efficient, which measures inequality on a scale of 0 to 1, is increasing over time despite an increase in per capita income. According to the Household Income and Expenditure Survey 2022, Bangladesh has witnessed the rise of Gini co-efficient to 0.499 in 2022 from 0.458 in 2010.
Why are prices of most goods high beyond any justified reason? Unfortunately, no government has ever tried to investigate the problem and find a suitable answer. The agencies concerned have no activities to check this instability. Earlier, advisers and bureaucrats were vocal against market cartels, but they now appear silent about this. The economists lay an emphasis on the alternative supply of goods to rein in price increase. The commodities that the government sells through the Trading Corporation of Bangladesh, or other means, are very little compared with the requirement. So, there is no impact of this. Surprisingly, consumers purchase at higher prices, but producers or farmers do not get fair prices. The price of goods is increasing mainly because of syndication, unusual transport costs, extortion and commission business on the wholesale market. The allegation that business syndicates are very much active, at least in marketing a few items, has again proved to be true.
And there is no reason to think that they would vanish during the rule of this or any future government. The decline in prices of eggs after the government鈥檚 announcement to allow import of the item is a case in point. How does the cost of a dozen eggs decline by Tk 20 in a day? It must be the handiwork of the big players, or corporate suppliers, in the trade. The authorities must not stop importing a few million eggs to cool off the market. They must go beyond that, find the big fish and take them to task. In another instance, available data show that the country produces onions more than it needs. Still, if India restricts the onion export, prices shot up almost instantly. Why? The same is true for some other items, including rice.
That the per-acre aman rice yield this season is notably higher than that of the last season, when the country reportedly had produced an all-time high of 16.7 million tonnes, is a piece of welcome news. Despite the indication of a good aman harvest this year, rice prices continue to be stubbornly high because in some cases, the market here does not follow the law of demand and supply. Syndicates of unscrupulous sections of the traders rule the roost on the market and make windfall profits. In such a situation, prices in the local market can only have an upward trend. Businesspeople often cite international market trends or natural disasters as justification for increased prices. However, their sole purpose is to keep prices of goods inflated by any means possible. They are also aware that once prices increase, it is difficult to bring them down again.
Encouraged by corrupt practices of big shots, some traders bother little about the directives from higher authorities to keep prices under control. A riddle of the level of rice production is that the deposed regime had always claimed that it had increased rice production to the level of self-sufficiency, but Bangladesh imports a bulk quantity of rice and other food grains every year. This suggests the existence of a gaping hole between the claim and the actual production. People are found alleging the lack of 鈥榤arket monitoring鈥� when prices of certain essentials go up. How effective will market monitoring be when many issues distort the price mechanism? That is why drives conducted by the consumers鈥� rights protection directorate do not produce any results.
Abnormal increase in goods prices are diseases and they have many symptoms that need to be addressed with the right kind of medicines. The government took an initiative to establish markets at different spots to ensure fair prices for farmers. The intermediaries are also active there. The people who get the allotment of shops are not genuine farmers. It is unfortunate that a fair market mechanism is yet to be established. Consumers are affected. The international market is blamed for the price increase of imported goods. But why does this happen in the case of locally produced goods? Consumers buy goods at a higher price, but the producers do not get the benefits. The intermediaries rake in the profits.
There is no alternative to increasing the supply of goods and strengthening the monitoring system to overcome this situation. The government should take strict measures against any syndicates profiting off increased prices by creating an artificial crisis and improve supply-chain conditions. Additionally, they should increase allocations for subsidised food programmes such as the open market sales and other initiatives of the Trading Corporation of Bangladesh to ease some pressure on low-income groups. What we need now is an increase in the supply of goods, both through imports and local production, for which a bigger finance is needed. To create such a space, unnecessary costs and waste of resources must be stopped. Bangladesh mostly exports apparel products. As the whole world faces economic slowdown and inflationary pressure, people of middle- and lower-income categories will prioritise their spending on food, education, health care, housing and other necessities and cut their expenses on clothes.
The lower growth and the apprehension of many economies slipping into recession are alarming signs for our export sector. The role of the Competition Commission now needs to be strengthened, particularly in the case of the essential consumer goods market. The commission should develop a database, regularly monitor the operations of dominant market players, examine the market control and manipulation, if any, and take proper measures. The distribution of essential goods sold through the open market system must be managed effectively and without corruption so that eligible people can access the goods for low prices.
The social safety net is not working as expected. For that, the government must overhaul the entire system of social support. Rather than fixating on scattered allowances, it should implement comprehensive rehabilitation programmes aimed at lifting the poor out of poverty.
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Liton Chandro Sarkar ([email protected]) is deputy director of the Bangladesh University of Professionals.
