Target lower inflation

Everyday essentials have remained expensive for the last one year due to high inflation and the government's little control over local trade cartels whereas international markets have been relatively stable for quite a long time.
The purchasing power of consumers has continued to fall, as their income has not kept pace with the rising expenditure.
Food inflation shot up due to disruption of supply caused by consecutive strikes and blockades at the beginning of this fiscal year. It went down by only 0.01 percentage point in April from 8.96 percent in March.  
Non-food inflation, however, declined steadily from 7.4 percent at the onset of the current fiscal year to 5.2 percent in April this year.
On the whole stable global commodity prices coupled with moderately restrained monetary stance by the Bangladesh Bank and currency appreciation resulted in 7.5 percent inflation of food and non-food essentials in April, which was 0.5 percentage point more than the government target.
"Hopefully, the budget framework proposed [for FY 2014-15] in view of the domestic and global perspectives will support growth as well as contain inflation. People will find their aspirations reflected in it," Finance Minister AMA Muhith said in his budget speech yesterday.
The high food inflation in the recent months is largely explained by the higher rice price at the retail level.
The prices of coarse rice went up 13 percent in 2013, according to state-run Trading Corporation of Bangladesh (TCB). The prices of all other sorts of rice rose by 9-18 percent.
The prices of flour (atta), potato, powdered milk, broiler chicken and onion went up.
Consumers, however, witnessed in relief the prices of ruhi fish, sugar, farm eggs, garlic, soybean oil and lentil decline or remain unchanged, as per the data of the TCB.  
Separate researches show the cost of living in Bangladesh went up by as much as 11 percent in 2013 for an increase in the prices of various essential food items, house rent and utility bills.
However, in the international market all the key commodity price indices, except for energy, declined significantly in 2013, according to the World Bank Global Economic Prospects published in April.
 The government is now aiming for 6 percent inflation in FY 2014-15, though it has not achieved its goal of 7 percent in the outgoing fiscal year.
Overall inflation was 7.3 percent in FY 2009-10, 8.8 percent in 2010-11, 10.6 percent in 2011-12 and 7.7 percent in 2012-13.
Muhith expressed the hope that “the declining trend of food prices” in the neighbouring country as well as other countries will pull down the prices of food grains in Bangladesh in the coming days.
"The declining trend in food and energy prices in the international markets along with satisfactory domestic agricultural production and supportive monetary policy would bring general inflation to around 7.0 percent by June 2014.
"The inflation will be reduced further at the end of the next fiscal year," Muhith said.       
However, the target was set at a time when the prices of food items in the international markets increased by 4 percent (between January and April) putting an end to the declining trend since August 2012, said an economist of the World Bank in Dhaka.  
Economists termed the inflation target very ambitious, saying containing inflation within 6.5 to 7 percent in FY15 will be a satisfactory achievement.
To achieve the target of 6 percent inflation, food inflation has to be brought down substantially, said Mustafizur Rahman, executive director of the Centre for Policy Dialogue, a local think tank.
Any substantial decrease in food inflation would depend on the performance of boro crop, the boro price and the government's procurement rate, he added.  
“Inflation is expected to decline in FY15 on continued policy restraint, though higher wages and adjustments in administered prices pose upside risks,” the International Monetary Fund said.
However, any rise in electricity and fuel prices will ultimately increase the prices of products whose production relies on energy, making everyday essentials dearer further.