Dearness allowance: not a prudent option

The government's recent decision to grant a dearness allowance (DA) to approximately 1.4 million government and semi-government employees may appear a well-timed move against the backdrop of spiraling inflation. However, the underlying question remains: does this decision address the root cause of the economic distress? For the majority of citizens, particularly those in the private sector or middle-class households, this measure offers little relief. If inflation continues to rise unchecked, the proposed allowance might even exacerbate their plight by indirectly contributing to further price hike.
Bangladesh has been grappling with soaring food inflation, which climbed from 11.36 per cent in August to an alarming 13.80 per cent in the first week of December. Despite government assurances, the daily struggles of ordinary citizens -- whether buying essentials or meeting household expenses -- persist unabated. The DA, while benefiting government employees, fails to address the broader issue of rising living costs. Moreover, it risks deepening the economic disparity between public sector employees and those in the private sector or informal economy, who far outnumber the beneficiaries of the allowance.
One critical consequence of raising the DA is its potential to fuel inflation further. With an increase in disposable income for a section of the population, traders often seize the opportunity to raise the prices of essentials, citing increased demand or other arbitrary reasons. This creates a vicious cycle: higher allowances lead to higher prices, which in turn nullify the benefits of the allowance and worsen the plight of non-government employees, small business owners, and daily wage earners.
While the government has introduced measures such as open market sales (OMS) and food subsidies for the poor, the middle class remains conspicuously ignored. This segment, which neither qualifies for social safety nets nor benefits from government employment perks, is increasingly burdened by the rising cost of living. The middle class forms the backbone of the economy, yet its resilience is being tested by stagnant incomes and escalating expenses. Without targeted interventions for this group, the economic divide will only grow wider.
The crux of the issue lies in curbing inflation, which is the principal driver of economic hardship. High inflation erodes purchasing power, widens the poverty net, and undermines the effectiveness of temporary relief measures like DA increments. Tackling inflation requires addressing structural problems in the economy, including market manipulation, extortion, and inefficiencies in supply chains.
The persistence of these issues, even under a caretaker government, highlights the influence of powerful market syndicates that manipulate prices to their advantage. Disrupting this nexus must be a top priority. Ensuring the enforcement of fair trade practices, cracking down on hoarding, and reducing extortion at every level of the supply chain are essential steps toward stabilising prices.
The interim government has a unique opportunity to prioritise economic stabilisation without the distractions of electoral politics. Its machinery must be directed toward dismantling the market syndicates that drive inflation. Strengthening oversight mechanisms, ensuring transparency in price-setting, and promoting competition in key sectors can help rein in inflation and restore public confidence.
While short-term relief measures such as DA increments may provide temporary solace to a select group, they do not offer a sustainable solution to consumers' economic woes. The real solution lies in fostering an environment where prices remain stable, and citizens --regardless of their sector of employment -- can afford basic necessities without undue hardship.
In conclusion, addressing inflation is not merely an economic imperative but a social one. Rising prices disproportionately impact the poor and middle class, pushing them into deeper financial insecurity. By focusing on reducing inflation instead of distributing allowances, the government can create a more equitable and sustainable economic environment. We urge the interim government to channel its efforts into tackling inflation at its root, ensuring that all citizens, not just a privileged few, can benefit from a more stable and just economy.

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