Inflation, thriftiness and economy
Shamsul Huq Zahid | Monday, 28 July 2008
With the holy month of Ramadan approaching, the people are expecting yet another round of hike in the prices of most essential commodities in the market. Such a hike though is a matter of tradition rather than a rule would deal a severe blow to most consumers this time.
The government as usual has already started swing its sword in the air by issuing threats to invisible enemies who are conspiring to raise the prices of essential commodities on the eve of Ramadan. The people are used to this type of useless threats. Rather they consider such threats as signs of something ominous looming in the horizon.
The record is that no government, political or otherwise, could dissuade the traders from raising the prices of essentials on the eve or during the holy month of Ramadan. But the period under the present caretaker government is different from any other previous government. Never before, the prices of commodities recorded such a huge increase within such a short period. The rate of price increase of essentials ranged between 50 to 130 per cent over a period of a year. So, the plight of the poor and the fixed income people does not require any elaboration.
The present government after coming to power on a number of occasions has tried to rein in prices through so-called market monitoring and some other means of market intervention but it has failed miserably. It has also tried a few fiscal measures, such as reduction of import duty on most food items. But that too failed to make any impact on the price situation. It is the global market should be blamed more than anything else for the ongoing price situation. The prices of most food items, other commodities and fuel oils increased abnormally in the global market for the last one and half years.
But that situation is changing now. The prices of edible oils, milk powder, rice, wheat and some other commodities have started declining in the international market. The consumers would be grateful to the government if it could make the traders to bring down the prices of those commodities in line with those in the international market. Such a price decline would surely have a welcome effect on the prices of other essential commodities.
The Bangladesh traders, to a large extent, are a bunch of greedy people. When the prices of any item go up in the international market, they raise the prices of that commodity instantly at a rate more than what is justified. But when the prices decline in the global market, they are not that agile and prompt in reducing their price levels on the plea that goods in their stock are imported at higher costs. Consumers have lots of complaints to make against traders. But there is none to address those.
The incumbent government, apparently, is more preoccupied with elections of all sorts rather than looking after the economic wellbeing of the common people. It could be that the government out of sheer frustration has let the market forces play their parts in determining the fate of the consumers.
The commerce adviser held several meetings with all stakeholders in trade and industry with a view to bringing down essential prices. The government took both tough and soft stances on a number of occasions with a hope that those would have an impact on the price situation. But in most cases, the government failed to reach its objectives and the prices went on rising.
There is no denying that the one of the top priorities before the present government is the holding of general election according to its earlier announced roadmap. But what the people desire more than anything else now is an immediate solution to the price problem that has hit them hard.
The poor are now having one meal a day, instead of two. The middle class people are spending the most part of their incomes on foods and house rents and finding it hard to save even a paltry amount for rainy days. Some are even eating up their savings.
Except for the affluent section of the society, the people in general are now thriftier than before; they do remain concerned more about meeting essential expenditures. The businesses dealing in goods other than food items and banks have been taking the brunt of such an attitude of the consumers. People in lesser numbers are visiting shops and market these days, leading to a marked decline in the turnover of the business establishments.
Banks are complaining about liquidity shortage since the people do not feel attracted to save money these days because of high inflation. On the one hand they are finding it hard to save money in view of the soaring cost of living and, on the other hand, those who have savable fund are found not interested in depositing the same with the banks because of the very low rate of return. The high inflation rate has made savings with banks unattractive.
So, high inflation, which is cost-push in nature, has made the consumers thrifty and that thriftiness again is taking a heavy toll on other areas of the economy. Under the circumstances, the government while attending other priorities does need to address the problem of inflation, which, in the eyes of the general consumers, should be the top most priority task for the government.
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The government as usual has already started swing its sword in the air by issuing threats to invisible enemies who are conspiring to raise the prices of essential commodities on the eve of Ramadan. The people are used to this type of useless threats. Rather they consider such threats as signs of something ominous looming in the horizon.
The record is that no government, political or otherwise, could dissuade the traders from raising the prices of essentials on the eve or during the holy month of Ramadan. But the period under the present caretaker government is different from any other previous government. Never before, the prices of commodities recorded such a huge increase within such a short period. The rate of price increase of essentials ranged between 50 to 130 per cent over a period of a year. So, the plight of the poor and the fixed income people does not require any elaboration.
The present government after coming to power on a number of occasions has tried to rein in prices through so-called market monitoring and some other means of market intervention but it has failed miserably. It has also tried a few fiscal measures, such as reduction of import duty on most food items. But that too failed to make any impact on the price situation. It is the global market should be blamed more than anything else for the ongoing price situation. The prices of most food items, other commodities and fuel oils increased abnormally in the global market for the last one and half years.
But that situation is changing now. The prices of edible oils, milk powder, rice, wheat and some other commodities have started declining in the international market. The consumers would be grateful to the government if it could make the traders to bring down the prices of those commodities in line with those in the international market. Such a price decline would surely have a welcome effect on the prices of other essential commodities.
The Bangladesh traders, to a large extent, are a bunch of greedy people. When the prices of any item go up in the international market, they raise the prices of that commodity instantly at a rate more than what is justified. But when the prices decline in the global market, they are not that agile and prompt in reducing their price levels on the plea that goods in their stock are imported at higher costs. Consumers have lots of complaints to make against traders. But there is none to address those.
The incumbent government, apparently, is more preoccupied with elections of all sorts rather than looking after the economic wellbeing of the common people. It could be that the government out of sheer frustration has let the market forces play their parts in determining the fate of the consumers.
The commerce adviser held several meetings with all stakeholders in trade and industry with a view to bringing down essential prices. The government took both tough and soft stances on a number of occasions with a hope that those would have an impact on the price situation. But in most cases, the government failed to reach its objectives and the prices went on rising.
There is no denying that the one of the top priorities before the present government is the holding of general election according to its earlier announced roadmap. But what the people desire more than anything else now is an immediate solution to the price problem that has hit them hard.
The poor are now having one meal a day, instead of two. The middle class people are spending the most part of their incomes on foods and house rents and finding it hard to save even a paltry amount for rainy days. Some are even eating up their savings.
Except for the affluent section of the society, the people in general are now thriftier than before; they do remain concerned more about meeting essential expenditures. The businesses dealing in goods other than food items and banks have been taking the brunt of such an attitude of the consumers. People in lesser numbers are visiting shops and market these days, leading to a marked decline in the turnover of the business establishments.
Banks are complaining about liquidity shortage since the people do not feel attracted to save money these days because of high inflation. On the one hand they are finding it hard to save money in view of the soaring cost of living and, on the other hand, those who have savable fund are found not interested in depositing the same with the banks because of the very low rate of return. The high inflation rate has made savings with banks unattractive.
So, high inflation, which is cost-push in nature, has made the consumers thrifty and that thriftiness again is taking a heavy toll on other areas of the economy. Under the circumstances, the government while attending other priorities does need to address the problem of inflation, which, in the eyes of the general consumers, should be the top most priority task for the government.
[email protected]