Four million people of the country were pushed back anew to below poverty line due to sky-rocketing prices of foodgrains in the international market and damage caused to a major rice crop by natural calamities last year, World Bank (WB) Tuesday said.
It said the food-price shock is projected to have raised poverty rate by around 3.0 per cent from the baseline poverty rate of 40 per cent in 2005.
The WB said the net impact of the combined effects of economic growth and food-price shock on poverty is likely to decline by 2.0 per cent---from 40 per cent to 38 per cent in 2008.
Poverty rate that was expected to decline by around 5.0 per cent between 2005 and 2008 in line with the stronger GDP growth came down to 38 per cent, the WB said.
Lead economist Vinaya Swaroop of the WB Dhaka office disclosed this finding in a workshop with media on impacts of food crisis in Bangladesh.
Mr. Swaroop said the impact of food crisis cannot be answered properly because of absence of systematic consumption expenditure data.
"The overall food inflation in the country has been in double digits since the beginning of 2008, due mainly to rising rice prices," Mr. Swaroop said.
WB Country Director Xian Zhu, who chaired the session, said real cost of producing food appears to have increased permanently all over the world due mainly to higher fuel and fertiliser prices, and diversion of land for bio-fuels.
Hoarding of Boro rice by the farmers and intermediaries in anticipation of a lean future period and expectation of even higher prices is one of the reasons of increased price of rice in the local market, Mr. Zhu said.
"A 60 per cent increase in the price of rice alone, as has happened in the last 12 months, erodes nearly one-fifth of the income of a poor household," he said.
The country has presently overcome a major food availability problem due to bumper production of Boro crop, 17.8 million tonnes harvested in late May-June period this year, he said.
Mr. Swaroop said price of rice in the local market has not declined with the increased production; it is considerably higher now.
Rice price was Tk 25 per kg in July 2007, but now it is selling at around Tk 32 kg.
The WB economist pointed out some key reasons behind earlier supply shortage including twin floods in July-September 2007 and the November cyclone that damaged around 2.0 million tonnes of Aman crop.
Mr. Swaroop said after India imposed restriction on export of rice, local price of coarse rice rose to Tk 36 per kg in April 2008, about 50 per cent higher than that in October 2007.
"Food price inflation has caused enormous hardship in Bangladesh by eroding the purchasing power, particularly of the poor and low-income groups," he said.
In the rural CPI (consumer price index) basket, rice accounts for a 40 per cent share out of 60.5 per cent weight for food within the food basket.
Referring to 2005 Household Income and Expenditure (HIE) data of Bangladesh Bureau of Statistics (BBS) he said poverty rate declined to 40 per cent in 2005 from 49 per cent in 2000 due to strong economic growth.
He underscored the need for increasing rice productivity of Bangladesh, which was 40 per cent lower than that of China and 20 per cent lower than that of Vietnam.
The WB country director said the country could increase yields by 30 to 60 per cent through adopting advanced technology.
He said smart and time-bound subsidies, research-extension market linkages, investing on technology and infrastructures are needed to protect the poorest and vulnerable households in the wake of soaring foodgrain prices.
The WB has initiated several projects to help the government cope with the food price spike.
In response to the government's request to provide budget-support resources under global food crisis programme, the WB will extend its support to absorb the pressure from the expansion of food-based safety nets and build up food stocks, Zhu said.
It is preparing a national social safety net project focusing on urban areas, which is less covered under government's safety net programme. Another project titled 'cyclone recovery and restoration involving $109 million is in the pipeline.
