Prices of essential commodities have been high in the country's market for a long time. Not only are that, the rising trend of some products not stopping. As a result, people have to struggle to meet the demand for daily commodities.
Especially the poor and low-income people have to walk on the path of austerity to meet the cost of living. However, the government has already tightened monetary policy and reduced import duties to reduce inflation.
In such a situation, many are blaming the market syndicate. In addition, analysts believe that there is a lack of information in the production, demand and supply of goods.
Government data shows that the prices of essential commodities have increased recently. As a result, the struggle for living for fixed and limited income people has intensified.
Kamal Hossen, a grocer at concord market in the capital, said the prices of many essential commodities have increased over the last two to three months. As a result, people are forced to cut costs. They are struggling to cope with the situation.
He said those who used to buy three dozen eggs earlier are now buying one to one and a half dozen eggs. Earlier, those who used to buy 5 kg flour, now they are buying 2 to 1 kg flour.
According to the Trading Corporation of Bangladesh (TCB), the prices of medium rice, non-brand soybean oil, palm oil, potato, onion, garlic and cardamom have increased in the last one week. The retail price of 54 products is published daily on the website of the Department of Agricultural Marketing. According to their website, prices of 28 products have increased since last year and 13 have decreased.
Rashed Hasan, a private employee who came to Nayabazar market to shop, said the prices of many daily necessities are still very high. I think the government needs to do more. If people do not feel comfortable, then it will not matter how many measures they take to reduce prices.
Local traders are blaming internal and external factors for the price hike. One of the reasons is the decline in imports. Besides, internal reasons include damage to crops due to floods, supply chain disruption at this time. Market syndicates are another reason. Prices of essential commodities have increased due to market syndicates. According to the Integrated Food Security Phase Classification published by international organizations including the United Nations at the beginning of November this year, about 23.3 million people or 26 percent of the population of Bangladesh suffer from acute food insecurity.
On October 22, Bangladesh Bank (BB) raised the policy interest rate or repo rate by another 50 basis points to 10 percent to rein in inflation. The BB has increased the repo rate 11 times since May 2022. BB has increased the repo rate mainly to control demand and control inflation.
On the other hand, the interim government has reduced import duties on several products in the last three months to combat inflation. Potato, sugar, edible oil, rice and onion are on the list of duty reductions. However, despite monetary policy tightening and duty cuts, inflation reached a three-month high of 10.87 percent in October.
According to the Bangladesh Bureau of Statistics, food inflation stood at 12.66 percent in October while inflation in non-food items eased by 16 percentage points to 9.34 percent.
The commerce ministry has formed a 10-member special taskforce at the district level to monitor the market and review the supply system of essential commodities to control the situation. Besides, the authorities are selling food products at subsidized prices through open market sales programs in Dhaka and Chattogram.
Taslim Shahriar, senior assistant general manager of Meghna Group of Industries, said the price of sugar in the local market has come down slightly due to the reduction in duty.
He also said that the price of edible oil in the international market has been increasing at an abnormal rate for the last one and a half months. So even if the government reduces import duty, the price of soybean and palm oil may remain high in the country's market.
Taslim Shahriar said the price of wheat in the world market has also increased by leaps and bounds, but recently it has come down slightly. Wheat imports have increased.
Analyzing the prices of broiler chicken, beef and chilli, a trade organization has blamed inefficient market management for the recent price hike of essential commodities.
In October, the Dhaka Chamber of Commerce and Industry (DCCI) said food inflation rose due to continuous high cost of production, inefficient market system, high transportation rate, market dominance and low access for manufacturers to retail market.
The DCCI recommended strengthening the supply chain by reducing the activities of intermediaries and importing essential food items. Besides, a tracking system should be implemented for cash memos of local and imported food products. It also recommended subsidies on fertiliser, oil and electricity to reduce production costs.
Selim Raihan, professor of economics at Dhaka University, said the effectiveness of any initiative depends on its results. Although the interim government has taken several steps to control prices, there is no major impact on the results yet. His comments may have to wait a little longer. The pressure of continuous inflation has reached such a level that coordinated efforts of the ministries and departments are needed to calm the market.
He also mentioned that there is a lack of information in the production, demand and supply of goods. "There is a limit to raising interest rates because it is already hurting the economy in a different way. Investment and job creation are hampered. The government should also keep an eye on it.
Due to the increase in the interest rate of the loan in several phases, the business has come to a disaster. Investment has stalled due to rising costs.
Businessmen say that while the interest rate of consumer loans has been increased worldwide to control inflation, industrial loans have been increased in Bangladesh. As a result, the people dependent on the bank are suffering the most. After the fall of Sheikh Hasina's government, factories (Gazi group, S Alam Group, Beximco) were attacked and vandalized in different parts of the country. Many factories have stopped production.
According to the concerned, the policy interest rate has been increased three times since August this year, now the policy interest rate is 10 percent. As a result, the interest rate of the loan has exceeded 15 percent. It will increase in the future.
Due to the rise in commodity prices, the demand for consumer goods has decreased, causing manufacturers to collapse in sales and pressure to repay loans. Due to the increase in interest rates, it is directly affecting employment.
The 'crisis' is increasing due to the increase in production costs. The impact is on people with low or limited incomes who are unemployed or unable to adapt to high-value markets. However, the repo rate is being increased with the goal of reducing inflation, the inflation still remains at 10.87 percent.
In addition, the deadline for payment of installments has been reduced. Earlier, a customer defaulted if he failed to pay six installments. The rule of defaulting on non-payment of three installments has come into effect since last September. If you fail to pay an installment from March next year, you will be defaulted.
The former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), Md Jasim Uddin said that the 9 percent interest on a loan has now exceeded 15 percent. Even after the price hike, the fuel is not available as per the demand. Imports of capital machinery and raw materials have decreased. A few days ago, the factory was attacked, production stopped. Many employers are unable to pay salaries and loan installments properly.
He also said that businessmen will be defaulted if they fail to pay an installment from next March. Not only that, if an organization of an industrial group defaults, the banking of all the companies of that group is closed. As a result, raw materials cannot be imported. These rules of loan default should be implemented gradually. When the situation improves, the time for defaulting can be reduced gradually. Demanding the publication of the list of those who are willful loan defaulters, he said 95 percent of the businessmen return the bank's money. How have banks grown so much if they don't pay back?
According to BB, in the first two months of the current 2024-25 fiscal year, both opening and settling LCs (letters of credit) for import of goods decreased by about 13 percent. LCs for importing goods worth $10.03 billion were opened in July and August, which is about $1.48 billion or 12.85 percent less than the same period of the previous fiscal year. In July-August of that year, LCs worth $11.51 billion were opened.
Private sector credit growth was 9.84 percent in June of the 2023-24 fiscal year; At the same time in the previous fiscal year, which was 10.58 percent. At the end of the 2023-24 fiscal year, the total amount of loans distributed by banks in the private sector stood at Tk 16,41,229 crore. At the end of the previous fiscal year, the amount was Tk 14 lakh 94 thousand 256 crore.
According to BB data, the average interest rate of bank loans was 7.79 percent in July 2020. In July this year, it increased to 11.57 percent.
After the interim government came to power, economist Ahsan H Mansur took over as the governor of BB, who had been talking about reducing inflation by increasing interest rates. He walked that path after taking office. First, on August 25, the policy rate was increased by 50 basis points to 9 percent. The following month, it raised again by 50 basis points to 9.50 percent. The policy rate has been increased by 50 basis points to 10 percent. The interest rate of the loan has exceeded 15 percent.
Syed Nasim Manzur, former president of Dhaka Metropolitan Chamber of Commerce and Industry, said at a recent event, "There is no country where businessmen can make profit at double-digit bank interest rates. ’
Mohammad Hatem, president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said businessmen will become loan defaulters if they fail to pay an installment from March. This will increase the amount of loan default. According to the World Bank, seven countries, including Bangladesh, are at risk of economic bankruptcy. In this situation, the time for loan default has been reduced to three months. I think we need to relax a little bit at this time of the crisis that is going on. We request that the circular be repealed for at least one year.
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