Faulty macroeconomic management: People face immense financial hardship as cost of living crisis deepens

Muhid Hasan :
People of Bangladesh are facing immense financial hardship owing to high cost of living, skyrocketing commodity price hike, stagnant wages, government’s policy paralysis, failure to curb the market manipulation and lack of governance.

Amid soaring price of essentials, millions of people here are struggling to survive and their backs are against the wall.

However, some experts blame the covid-19 pandemic and the war in Ukraine for sudden surge in commodity prices, while others are quick to highlight the government’s failure to control the price hike.

Country’s overall inflation The Consumer Price Index (CPI) rose 9.02 per cent in FY23 against the government’s revised target of 7.5 per cent which was the highest average inflation rate in 12 years.

At the beginning of the current financial year of 2023-24, the government had aimed to bring down the inflation to 6.00 per cent.

However, in August this year inflation averaged 9.92 percent with record food inflation of 12.54 percent, according to the Bangladesh Bureau of Statistics (BBS).

Besides in July, overall inflation was stood at 9.69 percent – laying bare the magnitude of the cost of living crisis staring down on the poor and the low-income people.

The fixed income people mostly adopted negative coping mechanisms to sustain, include reducing the quality of food, reducing food purchases, taking fewer meals than usual, curtailing non-food expense, purchasing food on credit, skipping several meals, and curtailing medical, education expenditure as high inflation curtails their purchasing power and deepens the living crisis.

Khorshed Alam, a CNG driver in the city with five family members, said “My family has become almost vegetarian so that we can manage two meals a day.

We cannot even think of saving money. Rather, we sometimes need to borrow despite reducing various family expenditures.

“As my income becomes stagnant in recent months, it becomes very difficult to meet daily expenses when any of my family members falls sick” he added.

Sumon Ahmed, working in a private firm, said that he already lost his savings during the covid-19 period as his previous office laid off.

Now, combating with intolerable price hike for surviving he makes loan initially from relatives and friends and later from micro-credit borrowers.

“In September, my seven years old daughter suffered dengue fever and was admitted to hospital.

I had arranged all the medical cost borrowing from a local mirco-credit NGO with a high rate of interest,” he expressed anxiety.

Identifying the causes of price hike, the government said that the price hike of consumer goods has been connected to the international market, and it won’t go down until the global market is stable again.

While economists think, Bangladesh could not take adequate policy measures in time to rein in inflation rather some measures fueled the inflation to take new heights.

Non-economic factors, including business syndicate, lack of market monitoring also among the key factors for price hike in local markets, they identified.

Many other countries have managed to reduce inflationary pressure by adopting fiscal and monetary policy tools, Bangladeshi policymakers have taken sporadic steps to bring the desired market outcomes.

Even government’s extensive borrowing from banks, interest caps, and central bank’s monetary injection through printed money, NPL over Tk 131,000 crore in banking sector further fueled the inflation, they added.

Market observers said country’s daily essential commodity market is under the control of few big corporates which are blamed for market manipulation.

But the government has yet to go tough against them, as they are linked with the ruling party men.

Controlling the market manipulation, Dr Khondaker Golam Moazzem, Research Director of the Centre for Policy Dialogue (CPD), told to The New Nation that the government should formalize the supply chain of essential commodities through proper data management.

To ensure fair competition at all market level, the Completion Act-2012 can play a vital role along with introducing the investment ceiling for big corporations on essential products.

And this will help the small and medium investors confirm their role in the essential commodity market to rein in the volatile situation, Dr Khondaker Golam Moazzem added.