The Bangladeshi economy experienced an average inflation rate of 9.73% in the 2023-24 fiscal year, the highest in the last 13 years and significantly exceeding the government's target, revealed the latest report of the Bangladesh Bureau of Statistics (BBS).
The average inflation in the FY-2023 was 9.02% and the rate increased by 0.71 percentage points in a single year, according to the report titled Consumer Price Index (CPI), Inflation Rate and Wage Rate Index (WRI) in Bangladesh“.
The average food inflation stood at 10.65% in the last fiscal with a rise of 1.94 percentage points from 7.71% of the FY-2023 while the non-food inflation dropped to 8.86% from 9.39% of the previous fiscal year, revealed the report made available on Sunday (7 July) by the BBS.
The Bangladeshi economy experienced an average inflation rate of 9.73% in the 2023-24 fiscal year, the highest in the last 13 years and significantly exceeding the government's target, according to the latest report from the Bangladesh Bureau of Statistics (BBS).
The report, titled "Consumer Price Index (CPI), Inflation Rate, and Wage Rate Index (WRI) in Bangladesh," revealed that average inflation in FY-2023 was 9.02%, with a 0.71 percentage point increase in a single year.
Average food inflation stood at 10.65% in the last fiscal year, rising by 1.94 percentage points from 7.71% in FY-2023, while non-food inflation dropped to 8.86% from 9.39% in the previous fiscal year, explained the report.
The government set a target to reduce inflation to 6% in the last fiscal while formulating the national budget and increased the target to 8% in the revised budget.
The actual average inflation stood 3.73 percentage points higher than the original target and 1.73 percentage points higher than the revised target.
The economists and experts said that the government ignored the reality of pressure on reserve exchange rate of currency, rising cost of business due to hike on prices of power and energy while setting the target of inflation in the budget.
They also said that measures have not been taken to keep inflation within the target and there was shortage of fiscal initiatives to protect the poor people from the impact of massive inflation.
They also felt that the fixed earners particularly low income people faced a tremendous pressure with their life and livelihood with higher commodity price due to failure of the concerned government agencies regarding tackling inflation.
The series data of the BBS revealed that the average inflation surged at 10.92% in the fiscal year 2010-11 after a massive increase from 6.82% in the FY-2010.
Inflation dropped at 5.44% decade lowest in the FY 2017 at it started rising further while it crossed 6% in the fiscal year 2022.
The rate of average inflation jumped again 9.02% in the FY-2023 and it increased further in the last fiscal year.
Point to point inflation eased in June:
Point-to-point headline inflation compared with the same period of the previous year in June stood at 9.72%, 0.17 percentage points lower than the 9.89% inflation in May.
All indicators including food and non-food at the national level as well as in urban and rural areas showed a decline in inflation in June compared to the previous month, revealed the BBS report.
Food inflation fell to 10.42% in June from 10.76% in May, with a drop of 0.34 percentage points during the month.
Similarly, non-food inflation stood at 9.15% in June, down 0.04 percentage points from 9.19% in May.
Inflation in rural areas fell to 9.81% in June, BBS said. Inflation in rural areas declined by 0.18 percentage points from 9.99% in the previous month.
Inflation of food products in rural areas has come down slightly from 10.73% of May to 10.39% in June. And in rural areas, non-food inflation has slightly decreased from 9.31% in May to 9.26% in June.
Urban inflation eased to 9.58% in June, down 14 basis points from May's 9.72 percent.
During this period, food inflation in urban areas came down from 10.86% to 10.54% and non-food inflation fell to 8.98% in June from 9.03 percent in May.
How BBS measures the inflation:
The BBS measures the consumer price index (CPI) with change of prices of 383 goods and services from food and nonfood items.
Officials of the BBS collect the price data from 154 markets from 64 districts of all over the country. The BBS calculates the rate of inflation to analyse the change in the cost of living in a year.
The 9.72% point to point inflation in June represents a 9.72% increase in the cost of living in the last year.
The basket of commodities sold at Tk100 in June last year would cost now Tk109.72, while the people with a constant income have to consume a lower amount worth Tk9.72.
Growth in wage lower than the inflation:
The rate of wage for the labourers increased by 7.95% in last June, 1.77 percentage points lower than the rate of inflation.
The historical data of the BBS found a 1.5 percentage higher wage growth in Bangladesh compared with the inflation, but the wage growth remained lower than the inflation for 29 last consecutive months.
The BBS report revealed a 7.74% average wage growth in the last fiscal year, significantly lower than the average inflation, 9.73%.
What do economists say?
Target regarding controlling inflation in the last fiscal was not aligned with the reality, said Dr Ahsan H Mansur, economist and Executive Director at the Policy Research Institute (PRI) of Bangladesh.
He said, inflationary risks such as abnormal pressure on foreign exchange reserves and exchange rates were not taken into account in the budget announced amid the turbulent global economic situation.
Adequate initiatives have not been taken to deal with the pressure of inflation, he said, adding that lifting of the interest rate cap failed to realise the goal of reducing inflation by increasing the interest rate as the initiative came with a long delays.
Claiming that interest rate alone cannot control inflation, he said there is a major deficiency in market management in the country.
Prices commodities increased in the last fiscal due to the disruption of investment and production following various crises in the infrastructure sector including energy and power.
There was lack of combination among the monetary initiatives with the fiscal measure to tackle inflation in the last fiscal year, said Dr Fahmida Khatun, Executive Director at the Centre for Policy Dialogue (CPD).
She said that controlling in the supply of currency would not sufficient without proper fiscal initiatives, she said and explained that the government reduced spending for the poor to control the size of budget but maintained other spending as regular.
She noted that the rapid deviation of exchange rate while keeping fixed for a long time, also contributed to rising inflation.
She said that prices of commodities increase in Bangladesh due to distortion of completion in market caused by extortion, hoarding, cartels and other rent seeking activities, but government failed to initiate any effective measures to protest such distortion.
