Left to live through horrors of price rise
Shamsul Huq Zahid | Wednesday, 16 July 2008
No one knows for sure what is the current rate of inflation, which, led by rising food and oil prices, is posing a serious threat to the economic gains achieved in recent years and the survival of a vast majority of the population.
The Bangladesh Bureau of Statistics (BBS), the official agency responsible for gathering and compiling national statistics, has always been slow in its job. Most data collected by it (BBS) lose current relevance because of their delayed publication.
What is worse is that not many people feel like believing the BBS data, particularly those relating to inflation and growth. Unfortunately, there exists no credible source of national-level statistics in the private sector. Thus, it has become difficult either to get important macroeconomic data expeditiously or cross-check the same prepared by the BBS.
When Finance and Planning Adviser Mirza Azizul Islam in his budget speech on June 09 last quoted the BBS-supplied inflation figure at 9.0 per cent, the consumers who were taking the brunt of soaring prices of essentials, mainly food items, took it with a grain of salt. For their everyday-experience at the marketplace did not corroborate the inflation data quoted by the finance adviser.
Going by the prevailing price levels of essentials, one can presume that both the annual average and the point-to-point rates of inflation have reached their record levels. Even after the harvest of 'record' Boro rice, a poor daily wage earner is now spending between Tk. 34 and Tk.35 for a kg of coarse rice. Every food item is now costlier than what was even a couple of months back. The price level is not pinching the consumers but is hurting them grievously.
The finance adviser on a number of occasions recently admitted that his main worry is inflation and claimed that other macroeconomic indicators would continue to be stable in the coming months of this fiscal. Everyone would like to see the adviser's prediction about the economy come true. But does the real situation conform to what he is trying to portray?
The cost pressures on account of rise in the cost of raw materials, oil, labour wages and the interest burden have made a dent into the profitability of companies as well as their operational performance. To cope with the situation many domestic manufacturing units have been forced to raise the prices of the goods they produce.
Industries are actually preparing themselves for the worse as they expect inflation to rise further in the coming months. They might even be forced to increase the prices of their commodities further, thus, adding to the chiselling rate of inflation.
Under the circumstances, entrepreneurs in all probability would like to put their new investment plans on hold and prefer to watch the developments in the economy, at least, in the short-term.
What is more worrying is that many industrial units have started retrenching their workers and employees and some others are paying reduced salary and wages.
The decline in demands for goods and services is being felt at al levels, more prominently at the retail level. Consumers hit hard by an unbelievable hike in prices or essentials and costs of transportation have, obviously, cut their spending as far as possible. The middle class people, who are now eating up their savings just to keep themselves somehow afloat, have become extra-cautious in their spending. If one takes the trouble of gathering the daily turnover data of retail shops, large and small, of the recent days and compare the same with the data of anytime in 2005 or 2006, one might see the difference. However, the drop in consumers' spending is nothing unique for Bangladesh. It is happening most of countries, developed and developing, hit by inflation.
Banks and financial institutions are unlikely to remain immune from the adverse effects of the downtrend in industrial production and other business activities. They might witness a rise in loan default rates because of the ongoing slowdown in economic activities.
The central bank deserves appreciation. Rather, it has wisely not gone for the use of monetary tools to rein in inflation which is not demand-driven. A tight monetary policy, as the country's economists and trade promotional bodies consider, is not likely to be effective against global rise in food and oil prices which are largely responsible for the soaring inflation. Rather, such a policy would further slow down the economy further.
However, the government, which, these days, is busy more with politics than economy, has, apparently, decided to make the poor and low income people learn the art of living with the horror of price rise. The other day a government leader tried to take credit for building the largest ever buffer food stock. Does such a stock of food grains mean anything to a poor daily wage earner who spends most part of his or her day's income on rice only or to an individual who cannot afford two square meals a day?
[email protected]
The Bangladesh Bureau of Statistics (BBS), the official agency responsible for gathering and compiling national statistics, has always been slow in its job. Most data collected by it (BBS) lose current relevance because of their delayed publication.
What is worse is that not many people feel like believing the BBS data, particularly those relating to inflation and growth. Unfortunately, there exists no credible source of national-level statistics in the private sector. Thus, it has become difficult either to get important macroeconomic data expeditiously or cross-check the same prepared by the BBS.
When Finance and Planning Adviser Mirza Azizul Islam in his budget speech on June 09 last quoted the BBS-supplied inflation figure at 9.0 per cent, the consumers who were taking the brunt of soaring prices of essentials, mainly food items, took it with a grain of salt. For their everyday-experience at the marketplace did not corroborate the inflation data quoted by the finance adviser.
Going by the prevailing price levels of essentials, one can presume that both the annual average and the point-to-point rates of inflation have reached their record levels. Even after the harvest of 'record' Boro rice, a poor daily wage earner is now spending between Tk. 34 and Tk.35 for a kg of coarse rice. Every food item is now costlier than what was even a couple of months back. The price level is not pinching the consumers but is hurting them grievously.
The finance adviser on a number of occasions recently admitted that his main worry is inflation and claimed that other macroeconomic indicators would continue to be stable in the coming months of this fiscal. Everyone would like to see the adviser's prediction about the economy come true. But does the real situation conform to what he is trying to portray?
The cost pressures on account of rise in the cost of raw materials, oil, labour wages and the interest burden have made a dent into the profitability of companies as well as their operational performance. To cope with the situation many domestic manufacturing units have been forced to raise the prices of the goods they produce.
Industries are actually preparing themselves for the worse as they expect inflation to rise further in the coming months. They might even be forced to increase the prices of their commodities further, thus, adding to the chiselling rate of inflation.
Under the circumstances, entrepreneurs in all probability would like to put their new investment plans on hold and prefer to watch the developments in the economy, at least, in the short-term.
What is more worrying is that many industrial units have started retrenching their workers and employees and some others are paying reduced salary and wages.
The decline in demands for goods and services is being felt at al levels, more prominently at the retail level. Consumers hit hard by an unbelievable hike in prices or essentials and costs of transportation have, obviously, cut their spending as far as possible. The middle class people, who are now eating up their savings just to keep themselves somehow afloat, have become extra-cautious in their spending. If one takes the trouble of gathering the daily turnover data of retail shops, large and small, of the recent days and compare the same with the data of anytime in 2005 or 2006, one might see the difference. However, the drop in consumers' spending is nothing unique for Bangladesh. It is happening most of countries, developed and developing, hit by inflation.
Banks and financial institutions are unlikely to remain immune from the adverse effects of the downtrend in industrial production and other business activities. They might witness a rise in loan default rates because of the ongoing slowdown in economic activities.
The central bank deserves appreciation. Rather, it has wisely not gone for the use of monetary tools to rein in inflation which is not demand-driven. A tight monetary policy, as the country's economists and trade promotional bodies consider, is not likely to be effective against global rise in food and oil prices which are largely responsible for the soaring inflation. Rather, such a policy would further slow down the economy further.
However, the government, which, these days, is busy more with politics than economy, has, apparently, decided to make the poor and low income people learn the art of living with the horror of price rise. The other day a government leader tried to take credit for building the largest ever buffer food stock. Does such a stock of food grains mean anything to a poor daily wage earner who spends most part of his or her day's income on rice only or to an individual who cannot afford two square meals a day?
[email protected]