Reducing prices of essentials was the first of the five top priority
agendas on Awami League's election manifesto. Now, nearing three years
of its rule, the point-to-point inflation is twice what it was when the
party took power.
In fact, the point-to-point inflation has been in the double digits for the last six months.
SOARING PRICES
In
line with its election manifesto, the government has imported large
quantities of food and created a consumer rights protection
directorate, attempting to keep prices within people's reach. But all
efforts have been in vain.
According to the statistics
bureau, point-to-point inflation in December 2008 was 6.03 percent,
while in November this year it was 11.58 percent.
The figures
are far off the government's estimated target of a 7.5 percent
inflation this fiscal. The finance minister, who was optimistic about
the economy even two months ago, said he was uncertain about meeting
the 7 percent growth target, recently.
Speaking at seminar
organised by the Bangladesh Institute of Development Studies, A M A
Muhith admitted that efforts to tame inflation had gone in vain.
"Investment
levels have remained under 24 percent of the GDP for a decade now. That
is not a happy picture for a country that is aiming for 7-8 percent
growth," he said. "I am not sure where we are heading."
FUEL-LED INFLATION
Fuel
demand for rental power plants saw its imports almost double over the
last year, according to Bangladesh Petroleum Corporation.
BPC
chairman Abu Bakar Siddique told that the demand for
Bangladesh had been estimated at about 7 million tonnes of fuel in the
current fiscal that would cost Tk 480-500 billion.
The
petroleum corporation imported fuel worth about Tk 285 billion in the
last 2010-2011 fiscal that ended in June. The year before that
Bangladesh's fuel imports cost about Tk 165.66 billion.
Even
after raising the fuel prices four times this year, the latest being on
Thursday, the government has been spending billions subsidising it. To
fund this massive subsidy, the government borrowed profusely from the
banking sector at the beginning of the fiscal in July.
The
foreign exchange reserves fell under pressure and the borrowing in the
first four months of the fiscal reached 10 times more than what it was
in the same period last year. In fact, in the first four months, July
to November, government borrowings neared the Tk 189billion target
fixed in budget and then crossed it.
Economists hold that
this high fuel expenditure is wreaking havoc on an otherwise stable
economy which seems to be performing well considering, revenue, export
and remittances.
Prominent economist professor M A Taslim
explained that the government had struck deals with the power plant
companies that they would get fuel at a certain fixed price. "So now
the government is compelled to subsidise fuel because it is legally
bound to do so."
Mustafizur Rahman, the executive director of
the Dhaka-based research organisation Centre for Policy Dialogue, said
the higher bank borrowing was depriving the private investors, which in
turn was affecting the entire economy.
Bangladesh Institute
Development Studies director-general Mustafa K Mujeri had explained to : "Opportunities for the private sector to borrow money
shrink when the government takes loans from commercial banks. On the
other hand, new money hits the market if the government takes loans
from the central bank, raising inflation."
Meanwhile, in early December, Bangladesh Bureau of Statistics said fuel price hike was triggering inflation.
"Though
food prices are falling, inflation remained steady last month since the
impact of fuel price hike is now hitting other sectors," BBS director
general Shahjahan Ali Molla told the press in the bureau's first-ever
monthly inflation press meet.
PRESSURE ON RESERVES
At
the end of the year the central bank's reserves stood at $9.35 billion,
which would not be sufficient for paying off three months' imports.
During
the year, the reserve has frequently been above the $ 10 billion mark,
but rising import costs, particularly that of fuel, brought it below
that level.
TAKA CHEAPER
The value of taka against
US dollar dropped by Tk 10 in the past one year to Tk 80. Economists
say this is owing to the pressure on forex reserves.
On Dec
27, Bangladesh Bank said it had traded dollar for Tk 81.60, while
private and foreign banks sold dollar for even higher. Last year in
December, the price of dollar was around Tk 70 to 70.25.
In comparison taka has depreciated by almost 15 percent in 2011.
AGRICULTURE FLOURISHING
Rice
import dropped to almost zero last year and the government announced
that barring natural disasters, no need will arise to buy rice for the
next one year's supply.
Over 1.5 million tonnes of rice are reserved in the government warehouses, according to the finance minister.
"We
have officially estimated that there will be no need to import rice in
the next one year, if no big disaster occurs," he said.
The
ample stock is a result of bumper productions in the past few seasons,
non-governmental organisation BRAC's executive director Mahbub Hossain
told .
There will be no need to import rice until
2012 as the reserve is adequate, Mahbub, a former director-general of
Bangladesh Institute of Development Studies, said.
