Chokehold on the poor tightens

On a Friday midday in West Agargaon, Shahnaz Akhter stood at a vegetable stall in the summer heat, bargaining over the price of eggplants. Sweat traced lines down her forehead. The colours of her sari had faded.

Four hundred taka used to be enough for daily groceries she needed for her family of six. That was weeks ago. Now she comes home without cooking oil.

When she spoke, her voice was low, barely rising above the noise of the market. “Without oil, it’s simply not possible to cook,” said Shahnaz, 35.

Her husband drives an auto-rickshaw. Weeks ago, the family could cover groceries without going into debt. Now they buy on credit at the local store, or deliberately buy less than they need.

Shahnaz is searching for work as a domestic worker but hasn’t found anything yet. If she can’t, she says she’ll have no choice but to take her children and her mother-in-law back to the village.

Her situation is not unusual. Across Bangladesh, low-income families have spent most of the past three years absorbing wave after wave of price increases, each one arriving before the last had fully settled. Wages, for the most part, have not kept up, and the distance between what people earn and what it costs to live has been widening.

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Workers are under pressure from both sides: prices are rising while wage growth is losing momentum.

Zahid Hussain, former lead economist, World Bank’s Dhaka office

The numbers tell the story plainly. Inflation stayed close to 9 percent in March, continuing the elevated level. That sustained pressure has had a direct and measurable effect on household incomes.

According to the Bangladesh Bureau of Statistics, inflation has outpaced wage growth for 50 consecutive months, with the wage growth rate sitting at 8.09 percent in March, nearly one percentage point below the inflation rate.

In practice, this means that real incomes are negative, steadily eroding household purchasing power even as workers nominally earn more.

“Workers are under pressure from both sides: prices are rising while wage growth is losing momentum,” said Zahid Hussain, former lead economist at the World Bank’s Dhaka office.

Into that already strained reality, the government delivered another blow. On April 18, the energy ministry raised fuel prices to record highs. The increases amount to roughly a 20 percent jump across the board. In lockstep, the Bangladesh Energy Regulatory Commission raised the prices of liquefied petroleum gas.

Past trends show that when fuel prices rise, the cost of related goods tends to increase even more. The LPG price increase will only add to the pressure.

For Rezanur Rahman Rifat, who works at a private packaging company, the arithmetic is simple and grim. Fuel will cost him 20 percent more overnight, but his salary won’t increase until next year. So something has to give.

The 31-year-old father of one will cut spending, save less, and absorb the rest, even though his wife also works. Together, they must care for Rifat’s elderly parents as well.

What worries Rifat most is the long run: the amount he can set aside each month will shrink, leaving his financial future more exposed than it was a week ago.

Prof Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, put it in broader terms. Fuel price increases have wide-ranging effects, he said, raising costs across transport, domestic industries, export-oriented sectors, and import-substituting industries -- all of which eventually feed into broader inflation that households cannot avoid.

After years of elevated inflation, he said, this latest increase will erode purchasing power further at a moment when many families have little left to give. He expressed hope that the government would adjust domestic prices downward if global fuel costs decline, but was cautious about the near term: under current conditions, the impact is largely unavoidable.

The effects moved quickly through the city’s markets. At Karwan Bazar, vegetable vendor Mosharaf Hossain said rising transportation costs, combined with the end of the season for some produce, had pushed prices up by Tk 15-20 per kilogram in just the past week.

The state-run Trading Corporation of Bangladesh confirmed the trend in data that made for uncomfortable reading. Coarse rice, which sold for Tk 52.5 per kilogram a week ago, now costs Tk 57.5. Flour price is up 2 percent, garlic 2 percent, ginger 13 percent, cinnamon 10 percent, and green chillies have surged 50 percent.

Kamal Hossain sells fruit near Kalyanpur New Market and said his children often ask for chicken. He can no longer afford the Sonali variety, so he buys a broiler instead. Rice prices have gone up too, he said. He used to avoid Pangas fish, an option of last resort. Now, struggling to balance what he earns against what everything costs, he buys it without a second thought.

Sajedur Rahman runs a small eatery in Ibrahimpur Bazar, and his daily vegetable budget has climbed from Tk 700 to Tk 1,000 in a single week. Palm oil, which cost Tk 170 per kilogram just days ago, now sells for Tk 185. He is thinking about raising his menu prices to compensate, but he is also afraid that if he does, customers will simply stop coming.

The pattern these stories describe is what prolonged inflation looks like at the household level. Responding to high inflation, people would initially cut back on non-food expenses such as entertainment and clothing. If that is not enough, they would start reducing their food consumption, eventually skipping nutritious foods and opting for cheaper, lower-quality alternatives. It is a sequence that plays out gradually enough to be easy to miss, until a fuel hike in the middle of the night makes the whole thing visible at once.

In April, the World Bank projected weaker economic growth for Bangladesh and estimated that an additional 12 lakh people will remain below the three-dollar international poverty line this fiscal year, largely due to the economic fallout from the US-Israel war on Iran.

The World Bank predicted that the conflict will likely affect Bangladesh’s economy materially, compounding existing vulnerabilities that already include high inflation, financial sector stress, limited policy space, and weakened confidence.

Since the taka broke the long-held Tk 85 stability level against the dollar in early 2022, it has lost about 30 percent of its value, inflating the cost of every imported commodity, from fuel to cooking oil, before it reaches a market stall.

AHM Shafiquzzaman, president of the Consumers Association of Bangladesh, said the poverty rate has been rising for three years and that the middle class has been quietly sliding into the lower-middle class, squeezed by a lack of new employment and a growing burden on those who are still earning.

People are switching to cheaper food, he said, and the concern is not just financial. When families are forced to consistently eat less and worse, children do not develop properly, either mentally or physically, and the long-term cost of that is harder to measure than a fuel price, yet no less real.

Back in West Agargaon, Shahnaz Akhter is still looking for work. She has no timeline, no guarantee. What she could manage three months ago, she can no longer manage today -- and nothing suggests next week will be any easier.