The 12-month average inflation for the just-departed fiscal year 2023-24 rose to 9.73 percent, the government agency Bangladesh Bureau of Statistics (BBS) said on the call, which was the highest in the previous 13 fiscal years. Inflation averaged 9.02% in FY 2022-23. As a result, the average price inflation increased by 0.71 percentage points in one year.

At this time, food products increased by 1.94 percentage points to 10.65 percent from 8.71 percent in the previous financial year. And in non-food products, the price inflation decreased by 0.53 percentage points from 9.39 percent to 8.86 percent.

The June issue of the Bureau of Statistics' regular publication 'Consumer Price Index (CPI), Inflation and Wage Rate Index (WRI) Bangladesh' was released on Sunday. The annual average inflation rate has been rising consistently for the past three years, the report revealed.

Sources in the Ministry of Finance said that at the beginning of the last financial year, the target of reducing inflation to 6 percent was reduced to 8 percent in the revised budget.

Inflation was 3.73 percentage points higher than the original budget target and 1.73 percentage points higher than the revised budget target at the end of the fiscal year.

Economists and experts feel that reality has not been taken into consideration while setting the inflation target in the budget. They said that measures have not been taken to keep inflation within the target, and efforts have not been taken to protect the poor from inflation. They also felt that the low income people, especially the fixed income people, were under a lot of pressure for the last one year due to the apathy and failure of the concerned government agencies.

A review of data by the Bureau of Statistics showed that inflation rose from 6.82 percent in the fiscal year 2009-10 to 10.92 percent in the following fiscal year. Inflation has decreased continuously since 2011-12 to 5.44 percent in 2017. In 2021-22, the inflation rate was 5 percent and in 2022-23 inflation rose to 9.02 percent. In the outgoing financial year, the price inflation rose to 9.73 percent.

Inflation eased in June:

Point-to-point headline inflation stood at 9.72 percent in June as a single month, BBS said. Inflation decreased by 0.17 percentage points during this period compared to 9.89 percent in May.

All indicators including food and non-food at the national level as well as in urban and rural areas showed a decline in inflation in June compared to the previous month.

The review showed that food price inflation fell to 10.42 percent in June from 10.76 percent in May. As a result, the inflation of food products decreased by 0.34 percentage points during the month. Similarly non-food inflation declined by 0.04 percentage points to 9.15 percent in June from 9.19 percent in May.

Inflation in rural areas fell to 9.81 percent in June, BBS said. Inflation in rural areas declined by 0.18 percentage points in June from 9.99 percent in the previous month. During this time, the inflation of food products in the rural areas has decreased slightly from 10.73 percent to 10.39 percent. And in rural areas, non-food inflation has slightly decreased from 9.31 percent to 9.26 percent.

Urban inflation eased to 9.58 percent in June, the BBS said, down 14 basis points from May's 9.72 percent. During this period, food inflation in urban areas has come down from 10.86 percent to 10.541 percent. And in non-food products, the inflation rate of 9.03 percent in May fell to 8.98 percent in June.

How the BBS calculates inflation:

BBS prepares price inflation report every month by reviewing the prices of 749 varieties of 383 food and non-food staples in rural and urban areas. Field level workers of the organization collect data from 154 haat- markets in 64 districts of the country and send it to the price and wage branch online and through urgent mail.

The BBS presents data on changes in the cost of living over a year using point-to-point inflation.

Cost of living has increased by 9.72 percent in the past year, implying a 9.72 percent point-to-point inflation rate in June. The price of a product which was available at Tk. 100 a year ago now stands at Tk. 109.72. If income does not rise at the same rate, consumers will buy fewer goods and services than before.

Wage rates are below inflation:

According to the BBS, wages of working people increased by only 7.95 percent against the inflation rate of 9.73 percent in the outgoing June. As such, wage income has increased at a rate of 1.77 percentage points lower than the rate of increase in commodity prices.

According to the data of the Bureau of Statistics, historically, the wage rate in Bangladesh has increased at a rate of one to one and a half percent higher than inflation, but recently, the wage rate has been increasing very slowly. The review also found that wage rates have remained below inflation for 29 consecutive months.

A review of data by the Bureau of Statistics showed that wage rates rose by an average of 7.74 percent in the last 12 months against an average inflation rate of 9.73 percent. As such, wages have increased by 1.99 percentage points less than inflation.

What economists and experts say?

According to the Executive Director of Policy Research Institute Dr. Ahsan H. Mansoor, abnormal pressure on foreign exchange reserves and exchange rates, inflation risk was not taken into consideration in the budget announced amid global turmoil. Again no initiative was taken to deal with the pressure of inflation.

He also said that the objective of reducing inflation by raising interest rates has not been met due to the late lifting of the interest rate cap.

Claiming that interest rate alone cannot control inflation, he said there is a major deficiency in market management in the country. Apart from that, he also thinks that the price inflation has increased due to the disruption of investment and production due to various crises in the infrastructure sector including gas, electricity.

The Executive Director of the research institute Center for Policy Dialogue (CPD) Dr. Fahmida Khatun thinks that there was a lack of initiatives in the management of currency as well as revenue management to control inflation. She said that inflation control was of no use due to the long delay in raising interest rates. In the implementation of the budget, the government adopted austerity to increase the allocation to the private sector, especially for the poor, but the public sector has spent a lot of money. Inflation has also increased due to large devaluations of the money in a short period of time while keeping the exchange rate fixed for a long time.

He thinks that despite the increase in the prices of products due to various reasons including extortion, hoarding, cartels and no effective initiative is being taken by the government to reduce all these misdeeds.

Due to inflation, fixed income people, especially poor people, are suffering the most, he said, if the wage rate decreases than the inflation, the real income of the people and purchasing power decreases. He also commented that if this situation continues, the consumption of people will decrease.

He said that poor people are forced to rein in food, medical and education expenses to reduce expenses. He commented that reducing the expenditure in all these sectors hinders the development of human resources and said that the productivity and income of poor people may decrease in the future due to this.