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Bangladesh may struggle to meet the target amid volatility in the global market, gradual rise in fuel prices and subsidy cuts
Published : 01 Jun 2023, 04:27 PM
Bangladesh is targeting an average inflation rate of 6 per cent in the coming fiscal year amid volatility in the global market, the rise in fuel prices and subsidy cuts required by the International Monetary Fund loan deal.
“Due to the decrease in the prices of fuel, food, and fertilizer in the global market, along with the adjustment of fuel prices in the domestic market and government initiatives to keep the food and supply systems normal, the inflation will remain much controlled in the next fiscal year and the annual average inflation is expected to stand at around 6.0 per cent,” he said in his budget speech on Thursday.
The average inflation target for FY 23 was set at 5.6 per cent in the outgoing fiscal year, but it was changed to 6 per cent in revisions. Amid global economic uncertainty and runaway prices, the government still overshot the mark.
According to the data shared by the Bangladesh Bureau of Statistics, the 12-month average inflation rate in the outgoing fiscal year until April stood at 8.63 per cent, the highest in many years. The rising inflation trend is putting severe pressure on the poor.
The rate of inflation was 12.3 per cent in FY2007-08. Despite intermittent global economic recession in the last 14 years and a rise in food and fuel prices in the world markets, the government was largely able to keep inflation in check. In FY2021-22, average inflation was within 6.75 per cent.
Even in the last fiscal year, the average inflation was 6.15 per cent. Although the inflation increased due to the Russia-Ukraine war, the government has been making an all-out effort to check inflation and mitigate its impact on the people, Kamal said in the budget speech.
Bangladesh sought an IMF loan to build a buffer against depleting foreign currency reserves. The global lender released $476 million in the first instalment of the $4.7 billion package it approved for Bangladesh in February.
The government has taken several steps at the advice of the global lender to reform the financial sector's structure and policy, while also cutting subsidies and hiking the fuel price.
The government increased gas prices for industrial units and power producers on Jan 18. Thereafter, power prices were hiked thrice between Jan 31 and Feb 28, each time by an average of 5 percent at the retail level, directly raising the prices of essential goods.
The Bangladesh Bureau of Statistics used to count the average inflation rate based on the prices of 422 products. The state-run agency added around 300 more products to the list following the instructions from the IMF.
The country’s inflation rate reached 9.52 per cent in August last year, the highest in a decade. The rate dropped to 8 per cent in January and February but it increased to 9.33 per cent again in March. The rate eased marginally to 9.24 per cent in April.
