Taming inflation more urgent now

The Bangladesh Bureau of Statistics (BBS) has apparently come up with more credible inflation data, but those are not helpful either for government or the hapless average consumer. And, while it is certainly welcome news to learn that the dollar crisis has eased lately and there is no problem to open letters of credit, will that be enough to douse the flames in retail pricing? The price situation has undoubtedly been very difficult in recent months. In such a situation, the present governor of the central bank (Bangladesh Bank), Dr. Ahsan H. Mansur immediately following the disclosure of the inflation data outlined what the central bank was doing about inflation. He was frank enough to say that there was no easy and short fix for the soaring inflation and it may take anywhere between a year and 18 months to bring it down to acceptable levels. This is due to a myriad of factors, some beyond the control of any measure taken so far. For instance, the massive floods in October have played havoc with production of several crops and inflation in that month increased to 10.87 per cent.

Other factors include the wage increases in the apparels sector, but that increase will dissipate with time and it ought not to have long term effect. While the governor has laid out plans publicly about taking measures to keep prices of essentials stable in the holy month of Ramadan, it will be a major test for the present interim government to deliver on that promise. Past governments used to make a farce about keeping prices within reach as a big jump in prices of essentials during Ramadan had been more a routine affair.

Although various monetary and fiscal measures have been tried in an effort to curb inflation, the results have been less than satisfactory. Sadly, this government, like the ones preceding it, appear to have no control over the presence of rent-seekers at various points of the supply chain. This remains a sticking point; one so entrenched it appears that price escalations are inevitable. Previous governments too had opened up finances for import of essentials prior to Ramadan. Duty cuts on import this time round appear to be far more drastic than previous times, but how long can government afford to keep those duties at reduced rates? While it is understandable that policymakers wish to ease the suffering of consumers during the holy month, precisely what is being done to clamp down on the price manipulation carried out deliberately at every step of the supply chain? Why can't be there a system of checks-and-balances to legally curb the over enthusiasm of certain business entities from reaping super profits? It is not as though the government is lacking in legislation or the right instruments to take punitive measures against key players that engineer such price manipulation.

While the situation is expected to improve within weeks because there is the expectation of better supply of vegetables and fish, the nagging problems continue to exist because of an apparent lack of enthusiasm to bring to book those who choke and withhold regular supply of various staples in the market. The government should free up import of rice until the next Aman harvest to help cool down the rice market instead of issuing permits to select importers. If market players are unable to play by the rules, then let open market conditions prevail to sort things out at the cost of businessmen and to the benefit of consumers.