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Food inflation hits double digit in peak rice harvesting season

The general food inflation in April crossed double-digit again after a four-month gap, heightening the risk of food security for the majority of people.

The growth rate of overall monthly inflation slightly eased to 9.74 per cent from 9.81 in March, but food inflation remained high at 10.22 per cent.

Economists found double-digit food inflation in both rural and urban areas during the country’s peak rice harvesting period quite unnatural.

They observed that price hikes of food items like chicken, beef, lentils, sugar, and spices during Eid-ul-Fitr in the past month in the absence of effective price monitoring might add an extra push to the persistently high food inflation.

Former World Bank Dhaka office chief economist Zahid Hussain noted that the underlying reasons for high inflation over the past 22 months had not changed much.

The ineffective interest rate, shortage of dollars, lack of price monitoring, and low imports have been identified as reasons for the high inflation since August 2022, when the government hiked fuel oils prices by more than 50 per cent.

Besides, the government enhanced the prices of gas and electricity to appease the International Monetary Fund under the current $4.7 billion loan package.

The price hikes of energy items in the local market have already secured a $1.1 billion loan from the IMF and another S1.15 billion from the same multilateral lender soon.

However, the domino effects of price hikes of energy items on manufacturing items, agricultural production, and transportation costs have resulted in average monthly inflation of 9.02 per cent in FY23, the highest since FY12, when the Bangladesh Bureau of Statistics recorded 10.21 per cent inflation.

In the first 10 months of the outgoing FY24, monthly average inflation reached 9.73 per cent, making low- and fixed-income people vulnerable to food insecurity and nutrition deficiency.

Officially, 18 per cent population lives in poverty, but around one-third of the population is said to be vulnerable to shocks like food price hikes, floods, and droughts.

The Executive Director of the South Asian Network on Economic Modeling, Selim Raihan, said that fixed and poor people were in untold misery because of persistent high inflation.

He noted that the wage rate hike remained below inflation, meaning that they were either surviving the situation by borrowing or breaking savings.

While inflation is punishing people, a certain quarter  is benefiting, he added.

The BBS monthly update showed that double-digit food inflation was last recorded in November 2023, when food inflation was 10.76–10.86 in rural areas and 10.58 in urban areas.

It showed that food inflation in urban areas reached 10.19 per cent in April and 10.25 per cent in rural areas during the same month, which demonstrated that rural people were facing more food insecurity.

Non-food inflation was recorded at 9.06 per cent in rural areas, compared to 9.01 per cent in urban areas in April.

Zahid Hussain said that high inflation would persist in the coming months as the market-based interest rate announced recently by BB would require time to make an impact. 

Besides, the delayed impact of the market-based interest rate may also be affected due to the depreciation of the taka against US dollars by Tk 7, the highest in a single day in years, he said.

The devaluation of local currency has apparently been made to convince the IMF to release the third tranche of its loan package worth around $1.15 billion by this or next month.

On May 8, an IMF mission projected that inflation in the outgoing FY24 would be 9.4 per cent against the government target of 6.5 per cent.

The IMF, however, projected the inflation rate to drop to 7.2 per cent in FY25.

https://www.newagebd.net/post/country/235110/food-inflation-hits-double-digit-in-peak-rice-harvesting-season QR Code

Published Date: May 14, 2024

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