Essentials now a luxury for many due to rising costs: CPD

Infographics: TBS

Essential commodities have become luxury goods for many people in Bangladesh as the costs of food are rising disproportionately to income, affecting the general population, especially the poor, according to the Center for Policy Dialogue (CPD).

The non-governmental research organisation highlighted that the poor are getting poorer and the government's initiatives to deal with the situation are inadequate. It further criticised that the benefits of reduced import duties are not reaching consumers as they go to importers.

To address these issues, the CPD recommended prioritising the reduction of prices of essential goods and inflation in the upcoming fiscal year's budget.

The views came during a media briefing on "Bangladesh Economy 2023-24: Third Interim Review" held at the CPD office in the capital's Dhanmondi on Sunday (2 June). Khondaker Golam Moazzem, the organisation's research director, presented the review report at the briefing.

The research director highlighted that despite being a relatively low-income country, Bangladesh has the highest food expenditure. He also presented data showing price increases for essential goods from January 1, 2019, to May 19, 2024. 

He said, "In these five years, the price of miniket rice has increased by 17%, while the price of coarse rice has hiked by 30%. Paijam rice increased by 15%. 

"Similarly, the price of lentils has risen by 95%, flour by 40%, loose flour by 54%, refined flour (maida) by 60%, soybean oil by 84%, packaged soybean oil by 54%, and palm oil by 105%."

He further said, "This means, the prices of essentials consumed by the poor have increased more than those consumed by the wealthy, as they sell more."

Khondaker Golam Moazzem noted, "On the other hand, imported goods in Bangladesh are more expensive than in international markets. For instance, the international price of soybean oil is Tk105 per litre, while in Bangladesh, it is Tk163 per litre.

"However, domestically produced fish has seen a lower price increase. Beef prices increased by 57%, broiler chicken by 60%, local chicken by 55%."

He said, "Sugar prices have increased by 160%, with a kilogramme selling for Tk130 in Bangladesh compared to Tk39 (equivalent in euros) in European markets."

"Additionally, powdered milk prices have increased by 43-80%, garlic by 210%, dry chilli by 110%, and ginger by 205%, indicating that essential goods are becoming luxury items," the CPD research director added.

Talking to reporters, Moazzem stated, "The economy is experiencing a significant crisis due to weak policies, lack of good governance and necessary reforms."

Pointing out several economic challenges, including weak revenue collection, increasing government borrowing from banks, high prices of essentials, and deteriorating foreign reserves, he said, "These issues were present in the previous fiscal year, which prompted the government to adopt measures recommended by the IMF, such as market-based exchange rates and interest rates."

"Now, the general public expects the upcoming budget to address macroeconomic stability and implement necessary reforms to tackle these challenges," he added.

He also emphasised the need for austerity measures to control government spending, prioritise development projects, stabilise exchange rates to control inflation, and adopt market-based interest rates. He also recommended long-term development and reform plans.

Addressing the lower growth rate, the CPD in its report said the focus should be on macroeconomic stability rather than growth. The current per capita national income is $2,784, but this increase benefits high-income earners, while the poor are becoming poorer. 

Moazzem said, "Despite growth, the agricultural sector has not seen significant increases, and the manufacturing sector's contribution to GDP has decreased."

The report also highlighted that the implementation of public administration, education, and health projects is lagging and consequently, GDP growth is not translating into increased employment. 

The positive news is that those who returned to villages during the COVID-19 pandemic are now moving back to urban areas. But they are mainly working in informal sectors without adequate wages or working conditions, the report said.

The CPD criticised the government's contradictory policies, such as reducing export subsidies while increasing electricity prices and adopting expansionary policies through bond issuance. 

To overcome the current economic challenges, Moazzem urged the government to curb tax evasion, prevent money laundering, prioritise spending, and avoid unnecessary and luxury projects. 

He also emphasised the need to complete ongoing projects on time and eliminate political irregularities that increase project costs and timelines. 

"Economic stability is impossible without long-term reforms," he added.

Golam Moazzem further said, "Bangladesh has now entered a phase of 9-10% inflation. Inflation in Bangladesh is higher than in Sri Lanka. Although the government has taken measures to control inflation, these have yet to bring results."

"Demand has not decreased, nor has there been a noticeable slowdown in the economy. Imports are decreasing, while exports are increasing. Exporters should benefit from the currency devaluation, yet the expected growth from a 35% devaluation has not materialised. In 2022, export growth was 36%, but in 2023, it fell to 5%," he added.

"This indicates that export incentives are not the primary factor. Other issues are more significant. Global demand is fluctuating, leading to reduced demand. 

"Productivity must be increased and wastage reduced. Expenses outside the set rates in government offices should be minimised or eliminated, and market diversification is essential," he said.

Proposing that legal remittance flows be given special attention, he emphasised that economic stability requires stopping money laundering and illegal financial channels like hundi and hawala. 

"This won't be achieved through small-scale initiatives; the government needs to integrate all transactions comprehensively. This is a three to five-year task, but it must start now," he added.

He also mentioned that there is ample land, about 11 lakh hectares, to increase domestic production. "There are opportunities to convert single-crop land to double- or triple-crop land. Production of Aush and Aman rice, various vegetables, fruits, and livestock can be increased. However, it should be noted that the cost of agricultural production is rising, which weakens competitive ability," he added.

Regarding future energy needs, he said that the government's projections for electricity and fuel demand by 2041 are overestimated. 

He said, "These projections were made in 2019, before the pandemic, and do not reflect the current economic situation. The government estimates a demand of 98 million tonnes of oil equivalent (MTOE) for energy by 2041, but CPD believes it will be 72 million tonnes."

"For electricity, the government projects a demand of 58,410 megawatts, while CPD estimates it will be 27,345 megawatts. Therefore, new investments in the power sector are unnecessary," he added.