Looking at the rise in the prices of commodities, essential or not, common sense says, the inflation is not slowing down at the expected rate. In July 2023, according to the Bangladesh Bureau of Statistics (BBS), the point-to-point inflation rate was 9.69 per cent, while in the previous month of June, it was 9.74 per cent marking a modest improvement over the previous months. To all appearances, the government effort at combating inflation is not working the way it should. In the post-pandemic stage, inflation surged about everywhere and the reason for it was not hard to understand-the supply chain was disrupted globally. Then the Ukraine war made matters worse by pushing up fuel and food prices in the global markets. But, meanwhile, the volatility of commodity and fuel prices in the international arena has been tamed. Inflation in the advanced economies of Europe and North America is more or less under control. In South Asia, Nepal's inflation rate, which was 7.41 per cent in May 2023, has dropped by 0.58 percentage points to 6.83 per cent in June 2023. India's retail inflation rate, on the other hand, rose to a three-month high of 4.81 per cent in June 2023 from 4.25 per cent in May this year. India's consumer price index was the highest at 7.79 per cent in April 2022. But despite the recent rise, in absolute terms, the inflation rate in India seems to be well within the tolerable limit of the common consumers of that country. Pakistan, whose annual inflation rate was as high as 29.4 per cent in June 2023, could bring the inflation down for the second straight month to 28.3 per cent in July 2023. But the most remarkable feat has been achieved, of all other countries in South Asia, by Sri Lanka whose inflation rate rose year-on-year basis in September 2022 to its historic high at 69.8 per cent. But the country has been able to ease it gradually for the tenth consecutive month to 6.3 per cent in July 2023. So, the inflationary trend in Bangladesh should also improve at a faster rate than it has been doing so far. Seeing the success of some neighbouring countries in dealing with inflationary trends, though they are equally impacted by issues like the fuel and commodity prices in the global market, costlier US dollar and the Ukraine war, one wonders, why the situation in Bangladesh is different. And considering other neighbouring countries' performance, the argument that the inflation in Bangladesh is imported does no longer hold water.
Many would like to blame what they term 'syndicates' of importers or wholesalers who artificially distort the supply chain to their advantage to raise prices of goods and services to make super-profit. So, they urge government to crack down on the suspected market manipulators. The government, too, from time to time has been launching drives against businesses suspected of doing the mischief of market manipulation, but with little success. The central bank recently announced a contractionary monetary policy for the first half of the current financial year (FY 2023-24) with a view to tackling inflation as well as the continuing appreciation of US dollar against taka. The key policy rate has also been increased by 50 basis points to 6.50 per cent as part of the contractionary monetary policy to contain inflation. It is still too early to say how the new monetary policy will pan out. But some economists pointed to the government's increased borrowing from the central bank to meet its fiscal deficit as an important driver of the inflation.
The government should rather increase its revenue collection effort, especially from the tax-dodging super-rich, to manage fiscal deficit than print money. That would help combat inflation effectively, economists believe.
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