Price hike leaves poor people in tight spot

Noman Mosharef :

The sharp rise in commodity prices has left the general and low-income population in distress, forcing middle-class and lower-middle-class individuals to cut back on their daily necessities.

Consumers are grappling with inflated prices of essential goods, with a significant portion of their income now allocated to these necessities.

This situation has had a severe impact on the ultra-poor and low-income individuals, pushing the prices of essential items beyond their reach.

Many are unable to balance their expenses with their income, finding it increasingly difficult to sustain their households. As a result, they are living in extreme hardship.

The abnormal rise in essential commodity prices began during the tenure of the recently ousted authoritarian government, which cited the Ukraine war and global price increases as justifications.

However, despite a decline in global prices, the local market has not reflected these changes, leaving many in continued suffering.

It has been widely acknowledged that a class of opportunistic businessmen associated with the previous government played a significant role in driving up essential commodity prices.

Despite being aware of this, the former government took no corrective action.

Compounding the issue, severe flooding in mid-August devastated agricultural production in the eastern region, leading to expectations of increased imports to cover the shortfall.

Yet, traders have scaled back imports due to an unfavorable business climate and rising global prices, creating further uncertainty regarding investment returns.

Consequently, despite demand, traders are hesitant to import sufficient quantities of essential items.

Data from the National Board of Revenue (NBR) reveals a decline in the import of essential commodities, including cooking oil, sugar, and onions, during the two months following the fall of the Awami League government.

With prices rising in the global market, there are growing concerns about potential shortages if supply does not increase.

The reduction in imports has created pressure on the supply of essential goods, leading to price hikes for flour, soybean oil, palm oil, and onions.

According to the Trading Corporation of Bangladesh (TCB), prices for these items have risen by 1 to 4.5 percent within a week.

While a reduction in sugar tariffs has led to a slight decrease in sugar prices, the overall supply remains constrained.

In response to the growing crisis, the interim government, led by Dr. Muhammad Yunus, has decided to initiate an Open Market Sale (OMS) for essential items such as potatoes, eggs, onions, and pointed gourds in Dhaka starting today.

“For the first time, we are going to sell perishable items at various points in the city to provide relief to fixed-income groups,” said Agriculture Secretary Dr. Mohammad Emdad Ullah Mian.

The OMS aims to offer essential items at subsidised prices, with potatoes priced at Tk 30 per kilogram, eggs at Tk 130 per dozen, and onions at Tk 70 per kilogram. Green vegetables will be sold at least 20-30% lower than existing market prices.

The ministry plans to collect these perishables directly from farmers and sell them through designated spots across the city.

A total of 20 locations have been designated for the sales over the next two weeks, with plans to expand the program if the pilot project proves successful. The decision was reached during a special meeting between Chief Adviser Prof. Muhammad Yunus and several advisers, emphasising the government’s commitment to addressing the pressing needs of the population amidst rising prices.

According to the Trading Corporation of Bangladesh (TCB), in the two months since the new government took office, prices for six essential items have increased, while only two items have seen a decrease.

The surge in vegetable prices is particularly alarming, with eggs now costing up to 180 BDT per dozen, and prices of chicken and fish have also remained high, leaving consumers with little respite.

To combat inflation, Bangladesh Bank has raised interest rates and restricted the supply of currency in the market.

While this has helped stabilise the U.S. dollar at around 120 BDT, it has also driven up costs for traders of essential commodities. Despite efforts to curb inflation, the impact on food prices has been limited.

Although overall inflation has slightly dropped below 10%, food inflation remains above this level, meaning that citizens now need over 110 BDT to purchase what they could buy for 100 BDT last year.

The Bureau of Statistics of Bangladesh (BBS) calculates inflation based on the prices of over 500 goods and services, but even a slight increase in the price of essential items puts significant pressure on low-income households.

According to the BBS, while inflation reached nearly 10% in September, wages have only risen by around 8%, reducing people’s purchasing power.

The Ministry of Commerce, in response to soaring prices, requested that the National Board of Revenue (NBR) reduce import duties on onions, potatoes, and eggs.

As a result, the prices of onions and potatoes have decreased slightly, but other commodities continue to remain out of reach for many.

The ministry has held regular meetings to monitor the situation, but many decisions are hindered by objections from other government departments.

Experts emphasise the need for coordinated action to reduce prices, and some suggest that the government should consider offering more tax relief to alleviate public suffering.

Market analysts generally agree that the decision to raise interest rates was correct, as it reduces money supply and lowers demand, but warn that this policy may not be as effective for essential items, which have consistent demand regardless of market conditions.

For instance, the price of eggs is determined by production costs and supply, and when people have less disposable income, the demand for basic food items like eggs actually increases.

In recent weeks, the TCB reported that prices of coarse rice, soybean oil, palm oil, chicken, sugar, and eggs have risen, while only onions and potatoes saw price reductions due to government interventions.

Meanwhile, vegetable prices continue to climb, with items such as eggplant now selling for 60-100 BDT per kilogram, compared to 40-80 BDT two months ago.

At Karwan Bazar Kitchen Market, housewife Rehena Begum was haggling over the price of fish. She wanted to buy small-sized Rui fish at 300 BDT per kilogram, but seller Afzal, insisted that the price wouldn’t drop by a single taka.
Rehena Begum expressed her frustration, saying, “There’s no control over prices in the market. Everyone is raising prices as they please.

You can’t buy vegetables for less than 80-100 BDT. The price of eggs and fish keeps increasing. It’s a complete mess.”

Vegetable seller Ali Hossain added, “Every day, customers ask why the prices are so high. We have no answer for them. People are really suffering, and our profit margins have also decreased.”

As the government struggles to bring down inflation, the need for more targeted reforms in the supply chain and market regulation is becoming increasingly apparent.

Experts stress that without effective measures to stabilise the prices of daily essentials, the financial pressure on the general public will continue, and the new administration’s ability to provide economic relief will remain under scrutiny.