Poverty alleviation to face challenge if food inflationary trend continues

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Shakhawat Hossain
The country's poverty alleviation will face a great challenge if the current inflationary trend, fuelled by high food prices, continues for a longer period, a central bank report said Thursday.
"If the current food inflationary trend continues for a long span of time, the government's poverty alleviation programme will face a great challenge," said the central bank report titled 'Food Situation in Bangladesh'.
Moreover, the plan for reducing the poverty of 50 per cent by 2015 under the Millennium Development Goals (MDGs) will be very difficult to achieve, the report added.
The Bangladesh Bank (BB) report came after the point-to-point inflation in June crossed double digit mark again after it stayed at 7.6 per cent in April and 7.4 per cent in May.
The June inflation rose to 10.04 per cent due to rise in food price by 14.10 per cent, compared to non-food inflation at 3.54 per cent, according to the Bangladesh Bureau of Statistics.
The central bank report also came weeks after the World Bank said the food price shocks have slowed down the country's poverty reduction rate during the period 2005-2008.
The rate of poverty in Bangladesh declined to 40 per cent of the population in 2005 from 49 per cent in 2000.
But with the impact of food price shock (equivalent to three percentage points increase in poverty rate) factored in, poverty rate would have declined by roughly two percentage points over the same period, said a WB recent report.
The BB report prepared by its research department said fast increasing prices of food items enormously eroded the purchasing power as well as standard of living of hardcore poor, public employees, industrial workers, the unemployed and the people with limited income.
The food price hike has pushed a large number of people below the poverty line, added the report.
According to the central bank estimates, total import payment for food items shot up by 142.70 per cent in the FY08 over that of the same period of the previous fiscal.
Import payment for rice, wheat, milk food, sugar, edible oil, pulse and onion recorded increase of 397.11 per cent, 35.13 per cent, 62.52 per cent, 23.52 per cent, 931.35 per cent, 72.07 per cent and 102.65 per cent respectively as compared to that of FY 07.
Food price, particularly rice, in the country has almost doubled since early last year, forcing millions of poor households to cut back on their daily meal consumption.
Share of rice in a household budget averages around 24 per cent for an average Bangladeshi household and 33 per cent for poor households.
The report said higher price of items seriously affected the major macro-economic variables of the country such as inflation, revenue expenditure and balance of payment position.
"The overall trade deficit increased significantly by 28 per cent from US$4.97 billion in FY 07 to $6.36 billion in FY 08," said the report, adding that the highest ever trade deficit was attributed to 397.11 per cent increase in rice import.