Higher inflation and rising costs of living
Sunday, 10 June 2007
THE rate of inflation is showing no signs of abatement. The rate that was remarkably on the low side in the early nineties has now gone up. The latest official measure of inflation puts it at 7.4 per cent until last March and the same inflation rate is now possibly running in the neighbourhood of 8.0 per cent. Therefore, there is even by official acknowledgement that the rate of inflation has climbed up. However, this official estimate is considered to be not reflecting the reality . According to most of the reliable private estimates, the rate of inflation is already above the double digit.
Poverty alleviation in large measure boils down to people having more disposable incomes in their hands after buying the basic necessities for survival. But such disposable incomes for the greatest number in the population have been on a progressive decline. In many cases, people are not having any disposable income left after buying the bare consumption goods for daily living or paying the charges of essential services at costs that have been going up and up without a pause. They are finding it difficult to cope with the costs of living from their income and have resorted to borrowing or turned indebted in many cases.
Rising prices or charges respectively for goods and services are not problems in a setting where the money income or disposable income of people also tends to rise well above the rate of inflation that leaves people with their purchasing power intact or in better positions. But this has not been the case in Bangladesh. Here, inflation has been rising steadily but purchasing power has not even caught up with the rate of inflation, not to speak of overtaking the rate of inflation. Thus, in many cases, people have been worse off with their eroded purchasing power.
The effects of inflation and rising prices generally seem to be making the poor poorer. Regrettably, in many cases the extreme poor who seemed about to rise to a higher level of existence, have been pushed back to extreme poverty. The not so poor in other cases turned into extreme poor from the gradual erosion in their purchasing power and loss of the value of savings. The same phenomenon is working, quite disconcertingly, to decimate also the country's middle classes. The middle classes in a country generally are like assets who set and maintain social values and provide the array of professionals to run a dynamic and modern society, ethically. But the middle classes in Bangladesh have been under serious stresses, too. Thus, the lower segments of the middle class in some cases are joining the ranks of the poor while the higher middle classes are turning into lower middle class people. This scenario is hardly compatible with the targets of poverty alleviation or making the population more resourceful to aid in sustainable savings both at individual and national level to spur investment operations.
Against this backdrop, some fiscal and other measures like adequate allocations for imports of food items, complete withdrawal of customs duty on crude edible oil and lentils, continuation of duty-free benefit on essential commodities including rice, wheat, 'motor' dal and 'chola' dal, expansion of social safety net and expanded market operations by the Bangladesh Rifles (BDR) and Trading Corporation of Bangladesh (TCB) as announced through the proposed budget for fiscal 2007-08, will be, considered pro-active moves to help keep the market price tolerable. But it will be difficult to predict at this stage about how far such measures will have some moderating effluence on the price situation. In his post-budget press conference, the Finance Adviser has already made it clear that a "major change" in prices is unlikely against a backdrop of "a wobbly international commodity market". In this situation, the government will require to review and monitor the situation on a regular basis and to take appropriate steps for addressing the problems of imperfections in the market and for prudent management of both demand- and supply-side situation. It is a major challenge before the government to tame inflation and rising costs of living. The challenge has to be met though flexible policy responses.
Poverty alleviation in large measure boils down to people having more disposable incomes in their hands after buying the basic necessities for survival. But such disposable incomes for the greatest number in the population have been on a progressive decline. In many cases, people are not having any disposable income left after buying the bare consumption goods for daily living or paying the charges of essential services at costs that have been going up and up without a pause. They are finding it difficult to cope with the costs of living from their income and have resorted to borrowing or turned indebted in many cases.
Rising prices or charges respectively for goods and services are not problems in a setting where the money income or disposable income of people also tends to rise well above the rate of inflation that leaves people with their purchasing power intact or in better positions. But this has not been the case in Bangladesh. Here, inflation has been rising steadily but purchasing power has not even caught up with the rate of inflation, not to speak of overtaking the rate of inflation. Thus, in many cases, people have been worse off with their eroded purchasing power.
The effects of inflation and rising prices generally seem to be making the poor poorer. Regrettably, in many cases the extreme poor who seemed about to rise to a higher level of existence, have been pushed back to extreme poverty. The not so poor in other cases turned into extreme poor from the gradual erosion in their purchasing power and loss of the value of savings. The same phenomenon is working, quite disconcertingly, to decimate also the country's middle classes. The middle classes in a country generally are like assets who set and maintain social values and provide the array of professionals to run a dynamic and modern society, ethically. But the middle classes in Bangladesh have been under serious stresses, too. Thus, the lower segments of the middle class in some cases are joining the ranks of the poor while the higher middle classes are turning into lower middle class people. This scenario is hardly compatible with the targets of poverty alleviation or making the population more resourceful to aid in sustainable savings both at individual and national level to spur investment operations.
Against this backdrop, some fiscal and other measures like adequate allocations for imports of food items, complete withdrawal of customs duty on crude edible oil and lentils, continuation of duty-free benefit on essential commodities including rice, wheat, 'motor' dal and 'chola' dal, expansion of social safety net and expanded market operations by the Bangladesh Rifles (BDR) and Trading Corporation of Bangladesh (TCB) as announced through the proposed budget for fiscal 2007-08, will be, considered pro-active moves to help keep the market price tolerable. But it will be difficult to predict at this stage about how far such measures will have some moderating effluence on the price situation. In his post-budget press conference, the Finance Adviser has already made it clear that a "major change" in prices is unlikely against a backdrop of "a wobbly international commodity market". In this situation, the government will require to review and monitor the situation on a regular basis and to take appropriate steps for addressing the problems of imperfections in the market and for prudent management of both demand- and supply-side situation. It is a major challenge before the government to tame inflation and rising costs of living. The challenge has to be met though flexible policy responses.