Is govt action enough to curb inflation?

Persistent inflationary pressure, particularly in terms of food inflation, has been taking a toll on low- and fixed-income people in Bangladesh, forcing them to spend most of their income on nutrition.

The recently ousted Awami League government had taken steps to cushion this blow, especially by introducing food distribution programmes.

And though such measures remain in place, the question is whether these alone are enough to tackle inflation.

A record 32.61 lakh tonnes of food grains were sold at subsidised rates through public distribution systems like the Open Market Sale (OMS) and Vulnerable Group Development programmes in FY24.

The OMS alone distributed about 32 percent of the total grains, mostly rice and wheat, to increase market supply and maintain a price equilibrium.

Essential commodities, including oil and sugar, are also being sold at subsidised rates to around one crore family cardholders under a Trading Corporation of Bangladesh (TCB) programme.

Professor Bazlul Haque Khondker, chairman of the South Asian Network on Economic Modeling (Sanem), welcomed these moves but urged authorities to monitor distribution properly.

"We often receive allegations of corruption in the distribution process. At times, the support does not reach the intended beneficiaries," he said.

Towfiqul Islam Khan, a senior research fellow at the Centre for Policy Dialogue (CPD), said it is critical to plug these leaks in public food distribution programmes, including the TCB's family card initiative.

"The list of beneficiaries should be revisited to stop both inclusion and exclusion errors," he added.

Khan also emphasised the need to increase budgetary allocations for public food distribution initiatives.

"The last budget did not include adequate support to reduce the production cost of essential commodities. Even energy and fuel prices were kept high."

He suggested the interim government facilitate the import and distribution of essential commodities so that more players can enter the market.

Sanem's Bazlul Haque Khondker said the focus should now shift to framing non-monetary policies to control inflation.

He added that proper market management by removing the scope for extortion should be prioritised.

"The country may witness significant change in the next six months if the interim government can play a remarkable role with a tight monetary policy," he added.

The CPD's Towfiqul Islam Khan said recent changes in the monetary policy, including policy rate hikes and allowing banks more flexibility to fix interest rates, were taken with a view to addressing demand-pull issues.

However, conventional economic theories and past global experiences suggest that these measures need time to have an effect.

"The government policies have not adequately addressed the issue of cost-push inflation areas. The pressure on the exchange rate will be there for some time in the foreseeable future," Khan said.

He also mentioned that the official data does not adequately reflect ground realities and somewhat underestimates the inflation rate.

"The policies are taken with low-quality data year after year. It is high time we took immediate steps to improve this situation."