Rising food prices drive up general inflation to 9.89% in May
Food inflation surged by 54 basis points to 10.76% in May from 10.22% in April, while non-food inflation slipped 15 basis points to 9.19% from 9.34% in April
Just days before the budget for the upcoming fiscal year, expected to focus on curbing soaring prices, the country's general inflation surged to a seven-month peak of 9.89%, primarily fuelled by rising food prices.
Food price inflation jumped to 10.76% in May, according to the latest data of the Bangladesh Bureau of Statistics (BBS) released Monday (3 June). In April, food inflation rose to double digits at 10.22%.
Food inflation has stayed over 12% for three consecutive months from August last year, before subsiding to single digits by December.
Meanwhile, May's general inflation rate was the highest since October last year at 9.93%. It was 9.74% in April. Since March 2023, the general inflation rate has remained above 9%.
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M Masrur Reaz, chairman and CEO at Policy Exchange Bangladesh (PEB), said the country failing to ease inflation indicates that local policies are not working.
He said inflation rose partly because of interest rates. "It took a while, but we've finally fully liberalised interest rates."
He also linked inflation to Bangladesh's foreign currency instability, saying, "Because of the exchange rate, imports decreased by 26% leading to supply chain and industrial disruptions, contributing to high inflation."
Besides, a 35% depreciation of the dollar in the past two years has worsened the situation, he added.
The economist suggested that inflation should be given the highest priority in the upcoming budget.
He said monetary policy is made contractionary to control inflation. As a result, the next budget cannot be made too ambitious or expansionary.
"The budget deficit cannot be increased. Conservative development spending plans should be in the budget. Unnecessary projects cannot be taken up," added Masrur.
Towfiqul Islam Khan, senior research fellow of the Centre for Policy Dialogue, raised concerns about inflation data accuracy, noting that low-income people face higher inflation than official rates, particularly when food prices surge.
The researcher said the government's effort to curb inflation through monetary policy is a slow process. Therefore, protecting the low-income group is crucial, requiring both fiscal and monetary policies to address their needs
"Tax exemptions should be given importance to this population," he added. "Besides, ensuring market governance, tackling market manipulation is crucial."
Over the past year (June 2023 to May 2024), the average inflation was 9.73%, slightly higher than the 8.84% average during the same period the year before.
The government initially aimed to limit inflation to 6% for this fiscal year, but later adjusted the target to 7.5%.
Non-food inflation
According to BBS data, non-food inflation dropped in May to 9.19% from 9.34% in the previous month.
Health, housing, clothing, and transportation costs decreased during this period, contributing to the decline in non-food inflation.
However, inflation rose in the recreation and culture, and education sectors.
Inflation: rural and urban
Overall rural inflation in May reached 9.99%, up from 9.92% in April. Rural food inflation increased to 10.73% from 10.25% in April, while rural non-food inflation dropped to 9.31% from 9.60%.
In urban areas, overall inflation rose to 9.72% from 9.46% in the previous month. Food inflation increased from 10.19% to 10.86%, while non-food inflation rose slightly from 9.01% to 9.03%.
Additionally, the national wage rate in May 2024 was 7.88%, slightly up from 7.85% in April 2024. However, wage growth has remained below inflation for the past 28 months.
