Kitchen market volatility deserves attention
Monday, 18 January 2010
Shamsul Huq Zahid
While politicians and the media are shifting their focus from one issue to another, the latest being the Bangladesh-India relations, the food-led inflation has been gaining strength with the government remaining more or less an onlooker.
The increase in prices of most food items during this particular time of the year has come as a surprise to many. Rice has become costlier at a time when the newly harvested aman crop has arrived in the market. Never before vegetables were so pricey during the winter. Prices of pulses, onion, garlic and edible oils have gone up. Consumers are angry and frustrated.
The World Bank advised the government some weeks back to be watchful about the inflationary pressure. Last week, the Centre for Policy Dialogue (CPD), a private think-tank, listed the inflation management as one of the key challenges before the government.
The point-to-point inflation was about 6.75 per cent in October last despite the fact the average rate of inflation was slightly above 5.0 per cent. The way the prices of essentials have been going up unabatedly, the point-to-point inflation, in all probability, has gone up further by now.
Bangladesh is not alone to feel the heat of rising inflation. The inflation has been rising in most South Asian countries, including India. Though some reasons are country-specific, the up-trend in the prices of a good number of commodities in the international market is a common factor contributing to the inflationary buildup.
Bangladesh being dependent on import for most of its food items is always vulnerable to international market volatility. The price situation in 2008 is a pointer to that fact. The prices of most commodities, agricultural or otherwise, recorded an unprecedented rise in the international market in 2008. As the financial meltdown that originated from the number one global economic superpower, the USA, wreaked havoc across the globe in the latter part of 2008 and 2009, the prices of most commodities, including food and fuel oils, started coming down. Consequently, the prices of most commodities, including food items, also declined in Bangladesh in the first half of 2009, much to the satisfaction of a democratic elected government that was installed to power through December 29 election.
However, the easing of the price situation was short-lived. Since the middle part of the last calendar year, the prices started climbing again. And the government could not do much to rein in the same. In the recent months, the prices of most essential commodities have recorded a steady rise and reached almost the 2008 level. The coarse variety of rice is now being sold at Tk 30 and fine variety at Tk 40 a kg. A litre of soyabean oil now costs Tk.90 at the retail level. One kg of imported garlic now costs Tk. 110. Similarly, the prices of pulses, vegetables and sugar have surpassed the 2008 level.
The prevailing disorderly situation in the market is nothing new in Bangladesh. It does surface every now and then and the administration has time and again demonstrated its inability to discipline the same. However, some people tend to believe that the government's failure to rein in prices is deliberate as some unscrupulous elements in the government work hand in glove with the dishonest importers and traders of essential commodities and help the latter to reap undue profits at the cost of poor consumers. However, this is an assumption and not supported by any credible evidence.
There is no denying that controlling prices of any commodity is not the job of a government in a market-oriented economy. But, surely, it is the responsibility of the government to ensure a mechanism where dishonest traders cannot exploit the consumers. It can be done through market monitoring and proper and strict enforcement of relevant laws and rules.
The incumbent government soon after coming to power demonstrated that it is alive to the price situation problem. The minister concerned held meetings after meetings with the business leaders and traders concerned asking them to keep the prices of essentials within the reach of the common consumers. But in most cases, the ultimate outcomes of those meeting proved to be highly unsatisfactory.
The failure of the commerce ministry came out prominently during the last holy month of Ramadan. The commerce ministry, for the last few months, decided not to be proactive in the matters of market. However, the statement from the persons heading the ministry that the market has been rather stable in recent months has not gone well with the consumers.
The market is a very difficult place. It does not go by the pledges a government makes before election and has its own dynamics. The domestic as well external factors do come into play while determining the prices of any commodity, may it be rice or MS rod.
For instance, the incumbent government made an electoral pledge to make available rice to the poor at an affordable price and also ensure fair price to rice growers. But making a bridge between the two is always a difficult business. The government knows it, too.
Under the present circumstances, it is difficult to persuade the traders to sell their commodities at prices the consumers would prefer to buy. The traders do their own arithmetic while dealing in any commodity. The government should constantly monitor the international prices of commodities the traders import and make it known to the traders as well as consumers what should be fair and just prices of the same in the local market. This exercise is bound to put a moral pressure on the importers and traders and strengthen the bargaining position of the consumers. Besides, the government should try to remove the hurdles that the traders list as factors that are adding to the costs of goods.
While politicians and the media are shifting their focus from one issue to another, the latest being the Bangladesh-India relations, the food-led inflation has been gaining strength with the government remaining more or less an onlooker.
The increase in prices of most food items during this particular time of the year has come as a surprise to many. Rice has become costlier at a time when the newly harvested aman crop has arrived in the market. Never before vegetables were so pricey during the winter. Prices of pulses, onion, garlic and edible oils have gone up. Consumers are angry and frustrated.
The World Bank advised the government some weeks back to be watchful about the inflationary pressure. Last week, the Centre for Policy Dialogue (CPD), a private think-tank, listed the inflation management as one of the key challenges before the government.
The point-to-point inflation was about 6.75 per cent in October last despite the fact the average rate of inflation was slightly above 5.0 per cent. The way the prices of essentials have been going up unabatedly, the point-to-point inflation, in all probability, has gone up further by now.
Bangladesh is not alone to feel the heat of rising inflation. The inflation has been rising in most South Asian countries, including India. Though some reasons are country-specific, the up-trend in the prices of a good number of commodities in the international market is a common factor contributing to the inflationary buildup.
Bangladesh being dependent on import for most of its food items is always vulnerable to international market volatility. The price situation in 2008 is a pointer to that fact. The prices of most commodities, agricultural or otherwise, recorded an unprecedented rise in the international market in 2008. As the financial meltdown that originated from the number one global economic superpower, the USA, wreaked havoc across the globe in the latter part of 2008 and 2009, the prices of most commodities, including food and fuel oils, started coming down. Consequently, the prices of most commodities, including food items, also declined in Bangladesh in the first half of 2009, much to the satisfaction of a democratic elected government that was installed to power through December 29 election.
However, the easing of the price situation was short-lived. Since the middle part of the last calendar year, the prices started climbing again. And the government could not do much to rein in the same. In the recent months, the prices of most essential commodities have recorded a steady rise and reached almost the 2008 level. The coarse variety of rice is now being sold at Tk 30 and fine variety at Tk 40 a kg. A litre of soyabean oil now costs Tk.90 at the retail level. One kg of imported garlic now costs Tk. 110. Similarly, the prices of pulses, vegetables and sugar have surpassed the 2008 level.
The prevailing disorderly situation in the market is nothing new in Bangladesh. It does surface every now and then and the administration has time and again demonstrated its inability to discipline the same. However, some people tend to believe that the government's failure to rein in prices is deliberate as some unscrupulous elements in the government work hand in glove with the dishonest importers and traders of essential commodities and help the latter to reap undue profits at the cost of poor consumers. However, this is an assumption and not supported by any credible evidence.
There is no denying that controlling prices of any commodity is not the job of a government in a market-oriented economy. But, surely, it is the responsibility of the government to ensure a mechanism where dishonest traders cannot exploit the consumers. It can be done through market monitoring and proper and strict enforcement of relevant laws and rules.
The incumbent government soon after coming to power demonstrated that it is alive to the price situation problem. The minister concerned held meetings after meetings with the business leaders and traders concerned asking them to keep the prices of essentials within the reach of the common consumers. But in most cases, the ultimate outcomes of those meeting proved to be highly unsatisfactory.
The failure of the commerce ministry came out prominently during the last holy month of Ramadan. The commerce ministry, for the last few months, decided not to be proactive in the matters of market. However, the statement from the persons heading the ministry that the market has been rather stable in recent months has not gone well with the consumers.
The market is a very difficult place. It does not go by the pledges a government makes before election and has its own dynamics. The domestic as well external factors do come into play while determining the prices of any commodity, may it be rice or MS rod.
For instance, the incumbent government made an electoral pledge to make available rice to the poor at an affordable price and also ensure fair price to rice growers. But making a bridge between the two is always a difficult business. The government knows it, too.
Under the present circumstances, it is difficult to persuade the traders to sell their commodities at prices the consumers would prefer to buy. The traders do their own arithmetic while dealing in any commodity. The government should constantly monitor the international prices of commodities the traders import and make it known to the traders as well as consumers what should be fair and just prices of the same in the local market. This exercise is bound to put a moral pressure on the importers and traders and strengthen the bargaining position of the consumers. Besides, the government should try to remove the hurdles that the traders list as factors that are adding to the costs of goods.