Controlling inflation may take 12 to 18 months, as required in the case of all countries after the tightening of monetary policy, says the central bank's governor as inflationary pressure hits a new high.
The Bangladesh Bank Governor, Dr Ahsan H Mansur, said Thursday that in October, inflation increased to 10.87 per cent due to recent floods which caused production-and supply-chain disruptions.
Moreover, he said, some wage pressures developed last month, leading to wage increases, which impacted on price and caused wage-pushed inflation. "The rise is temporary."
The governor was briefing newsmen after a meeting on inflation situation and chalking out measures to keep essentials' prices stable during the month of Ramadan.
Finance Adviser Dr Salehuddin Ahmed presided over the meeting which was attended by the officials from ministries and departments concerned.
Justifying the rise of inflation, the governor said there is a "base effect" behind the inflation spikes.
"Since this past July, inflation indicators are not being controlled. In the past it was controlled artificially. So, the percentage change between controlled level and free level will remain high for few months," he said.
Regarding rice-price rise, the governor said the price is high in Bangladesh context, but this is not the highest price. Last year, the price was further high, by Tk 6.0 compared to the present high price.
"Compared to other countries, still we are getting rice at low price," he said, adding that duty on rice was cut down to zero, but none is importing because, even if rice imported from India, cost is going higher than the local price. Last year, rice price was up to Tk 65.
He said the government wants rice price to go down, "but at the same time, we have to think about the farmers. Because, farming input prices have gone up and labour cost also increased."
"So, it won't be wise to expect that rice price will go down significantly in the future."
However, the governor notes, international prices of commodities have not increased, energy price remains negative by 16 to 17 per cent, oil price worldwide got lessened, and LNG price fell, which will be helpful in the coming days. Moreover, the country's currency-exchange rate is "remarkably stable".
"Stable exchange rate with stable international market prices will lessen import-induced inflation," he hopes.
Mr Mansur said there is a necessity to contain domestic inflation and for that monetary policy has been tightened.
Regarding measures to keep commodity prices controlled during the month of Ramadan, the governor said, he will issue a circular Sunday to encourage banks not to charge any letter-of-credit margin for the essential commodities until the holy month.
Also, the single-borrower limit will be relaxed for the big importers of essential commodities for a couple of months to facilitate their imports.
"…on a temporary basis, keeping Ramadan in mind, we will withdraw single-borrower limit for big importers for next 2/3 months. This is a temporary decision for the time being for those products and not applicable to other products," he said.
He said importers of five to six products-like gram, edible oils and dates etc-will enjoy the facility.
Replying to a query, the governor said he deals with inflation, not with price level. Because, he fears, lessening price level may lead to deflation.
Urging all to have patience he said controlling inflation is not a matter of two to three months. "Twelve months is the fastest period for controlling inflation while in eighteen months you can do it in that range."
The governor said the country now does not have any shortage for foreign currency. Any businessman can open LCs without any hindrances.
"I urge all businesses to open LCs and import commodities. We believe in free market," he said, adding: "Go to banks-if any bank fails to give dollar, tell me. You won't get taka but will definitely get dollar."
Finance Secretary Dr Khairuzzaman Mozumder said the government had lessened tax on onions, potatoes, rice and edible oils to bring their prices under control.
When inflation remains high, to keep poor people out of its impact, measures need to be taken to pass through it. In this regard, the government has increased open-market sale of products, including vegetable, for the people in need.
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