Prime Minister Sheikh Hasina’s repeated instructions to strengthen the market monitoring system to control inflation especially the uptrend of the price of essentials in the country went in vain. Economists on Saturday accused the policymakers of failing to control inflation in the country as the common people have been hit hard by skyrocketing prices of essential commodities in recent days, according to media reports.
Common people are now cutting back on savings and expenditure, and also depleting their deposits and assets to cope with this unusual price situation, the economists say. Against the backdrop of a flare-up in inflation, Bangladesh Bank announced an increase in policy interest rates by 50 basis points and the discontinuation of the SMART interest rate system, which previously helped set lending rates.
The repo rate, a crucial interest rate benchmark, has been adjusted from 8.0% to 8.5%. This increase is expected to impact the interest rates on loans and deposits across the banking sector, potentially moderating credit growth and boosting bank deposits. The central bank explained that these measures are aimed at stabilising inflation and strengthening the country's foreign exchange reserves by making the loan interest rates completely market-based.
But the fact is that people ranging from poor to the middle class have cut back on consumption. Even many have been leaving cities and going back to villages for this reason. Besides, the higher middle-income groups have started ‘dissaving‘ by halting new savings and encashing old savings and deposits to cope with the situation.
People ranging from
poor to the middle class
have cut back on consumption
Global turmoil has certainly contributed to the situation, but poor macroeconomic management has deteriorated the situation. Authorities concerned must attach the topmost priority to controlling the inflation rate in the country against the backdrop of the impact of COVID-19 pandemic coupled with the Russia-Ukraine, Palestine-Israel conflict, the latest Middle-East tension and disruption of supply chain. High inflation is a bad thing and it is not possible on the part of Bangladesh alone to tackle inflation.
Therefore, it is now urgently needed to take more steps to bring down the price of essentials to tolerable level in the country in the wake of global economic context. As part of the measures, the government has already discouraged the import of luxurious goods which are not essential.
So, dependency on imported goods is being reduced while consumption of local products and services is increasing significantly. Agriculture should also be given the priority because of its importance in ensuring food security in this regard.
Area wise load shedding, shutting down diesel-run power plants, keeping petrol pumps closed in a week and other steps will reduce fuel import by 20 percent in this regard.
Maintaining imports at a reasonable volume and keeping foreign reserves stable is now a great challenge due mainly to a stress on the exchange rate originating from the increased demand for US dollar in the local market.
If the government makes savings and thus contribute to the national savings alongside reducing all the unnecessary expenses and cancel purchasing import-based luxury goods and giving priority to buy only the necessary goods, it would be successfully able to overcome the tough time.
When times are tough, the government will also have to take decisions that are tough too. The authorities concerned must execute the prime minister’s directives and strengthen the market monitoring system alongside conducting regular drives.
