Inflation rate on point-to-point basis hit a record 8.28 per cent in April of the current fiscal year after 1998 while the rate of inflation increase in rural areas was higher than in urban areas. Non-food items saw higher inflation than food items, marking a significant change in the trend of inflation as during the earlier months prices of food items rose at much higher rates than non-food items. Overall inflation rate continues to increase with a 0.85 percentage point increase in April compared to the rate in March. Inflation rate of food and non-food items increased by 0.45 and 1.59 percentage points.

Inflation rate in the recent period increased due to price hike of food items in both domestic and international markets. Inflation in Bangladesh also surged due to 21 to 33 per cent increase in the prices of petroleum products by the government. Bangladesh Bureau of Statistics (BBS) sources said inflation rate could reach 8 to 9 per cent on point-to-point basis in May-June period and on an average, inflation rate at the end of the current fiscal year may stand at over 7 per cent. High inflation rate has already been identified as one of the main challenges of the present caretaker government.

Finance ministry sources, said the government will take some measures in the upcoming budget to keep inflation rate at a tolerable level so that poor people are not affected. Following the government move, Tk 2412 crore is going to be allocated in the revenue budget for increasing agriculture production and to supply agricultural inputs at low costs. Of this amount, Tk 350 crore will be allocated for agriculture research, Tk 750 crore for diesel supply and Tk 1312 crore for supplying fertiliser and electricity at subsidised rates. Besides, social safety net would be expanded with higher allocation.

Inflation rate of food items rose by 0.45 percentage point in April reaching 8.98 per cent compared to the rate of 8.53 per cent in March, according to available data. On the other hand, inflation rate of non-food items rose by 1.59 percentage point in April reaching 7.35 per cent compared to the rate of 5.76 per cent in March. However, inflation rate of non-food items was between 4 to 6 per cent in the recent months, which crossed 7 per cent.

Overall inflation rate in rural areas increased by 0.90 percentage point reaching 8.45 per cent in April compared to the rate in March. Inflation of food items in rural areas rose by 0.29 percentage point in April reaching 8.79 per cent compared to the rate in March, whereas inflation of non-food items increased by 1.9 percentage point to 7.83 per cent in April. Overall inflation rate in urban areas increased by 0.74 percentage point reaching 7.86 per cent in April compared to the rate in March. Inflation of food items in urban areas rose by 0.84 percentage point in April reaching 9.44 per cent compared to the rate in March, whereas inflation of non-food items increased by 0.62 percentage point to 6.09 per cent in April.

The World Bank Vice-president for South Asia Praful C Patel at a press conference on June 2 identified the rising inflation as a significant downside and he disagreed with the governments’ position over the issue and suggested that the government ‘think very hard about it’. Currently, Patel said, consumer price index inflation in India and Pakistan were 7.6 and 7.7 per cent respectively, in comparison to Bangladesh’s 7.4 per cent, which is higher than the central bank’s ‘comfort level’. However, he added, inflation above the comfortable level will happen and measures against runaway inflation have to be taken.

On the same occasion, Jonathan C Dunn, mission head of IMF in Bangladesh, however said although global and regional inflation levels are comparable to the levels in Bangladesh, it is important that the public understand that there is enough scope for the government to make policy adjustments to rein in the high inflation levels. Saying that it is important to bring down the current inflation level, Dunn suggested tighter monetary policy as well as adjustments to the demand side as possible policy solutions. It is not good that people here are getting ‘used to’ the high levels of inflation, he said. The exchange rate is to be made more flexible to complement the monetary goals of reducing inflation, creating scope for further appreciation of taka, especially in view of the high foreign reserves, Dunn added.