Monetary policy and increase of price level

Bangladesh Bank announced on January 27 a monetary policy for the second half of the political-crisis-hit financial year 2013-14. It has targeted GDP (gross domestic product) growth of six per cent and inflation of seven per cent. That means the government has planned to lose the value of Taka to seven per cent. If we look five years back, when the Awami League government assumed power, the exchange rate of Taka against one US Dollar was around Tk 69 which is more than Tk 79 now. The government should try to reduce the exchange rate of Taka. It is observed that the price level have gone up to 45 per cent in the local market from that of the year 2009. Price level would further increase to seven per cent at the end of this fiscal year and Taka will lose its purchasing power about 52 per cent compared to 2009. The fixed income group has to reduce purchasing 52 per cent. Losing the purchasing power of Taka would affect the general people as a whole. Inflation helps the businesses to increase profit but hurts the fixed income group. Inflation should remain below five per cent in this situation. In a democratic country, the government should not take any decision that makes its citizens unhappy. The government and the Bangladesh Bank should take measures to ease the life of the citizens.

Md Ashraf Hossain

Central Bshabo, Dhaka

mah120cb@yahoo.com