Inflation eats away at earnings as rising spending stokes a cost-of-living crisis for Bangladeshis

Shirin Runa and Delwar Hossain Jewel usually buy the school books and stationery for their two children at the start of the year. This year, they couldn’t. They have to wait another month before they can afford to buy all the books, get the school bags and pay for new school uniforms.

These are the kinds of difficult choices families are facing due to the rising inflation in the country.

To Runa and Jewel, the long school closure due to the COVID-19 pandemic now seems like something of a relief.

The family has struggled for quite some time. As the price of necessities kept rising, so did the family's spending. Eventually the one-income household was spending more than it was earning every month.

Runa was trying to buy a schoolbag for her daughter in the Banasree residential area of Dhaka on Tuesday.

The high cost of living was driving her to despair, she said.

Most of her monthly budget was spent on the basic necessities, such as food.

“You can cut some corners in other places, but you can’t really do much to trim your food budget. Still, when I went to do my monthly shopping, I had to leave some things out.” 

Though they may not know the economic definition of inflation, those who have to manage their family’s day-to-day budget, like Runa, are feeling the strain in recent months.

The impact of the spiralling cost of living is being felt across the board. Along with low-income families, middle-income households are also struggling to make ends meet with their limited means. Instead of building for the future, they are being forced to draw on their life savings to stay afloat.

The added expenses are cutting into people’s ability to weather hospital bills, accidents or engage in festivities. Inevitably, they are resorting to loans.

Nazer Hossain, a labourer from Bogura living in Dhaka, is feeling the same strain. In 2017, Nazer used to earn around Tk 600-700 from paddling a rickshaw for 12 hours a day in the capital.

He covered his daily expenses, which included house rent, food and rickshaw fee, with Tk 300 at most. This meant he could send home Tk 9,000 every month without a second thought.

Although it wasn't a lot of money, it was still enough for him to get by comfortably.

Those were the good old days.

Five years on, his monthly income has risen to about Tk 17,000-18,000, but he is in distress. The increase in earnings has done little to raise his standard of living as most of the money is consumed by the surging prices of necessities.

Low-income people scramble to stand first in a queue for goods sold by a dealer of the Trading Corporation of Bangladesh outside the railways ministry in Dhaka. The crowds are equally packed in the queues for men and women. Photo: Mahmud Zaman Ovi

“I could eat a meal for Tk 60-70 before but now, you won’t get anything below Tk 120. A cup of tea costs Tk 6 instead of Tk 3 -- even the price of a glass of water has doubled to Tk 2.

The rent he pays to the owner of the rickshaw has risen from Tk 70 to Tk 120, while the living cost at hostels doubled from Tk 500 to Tk 1,000, according to Nazer.

He has had to hike rickshaw fares in order to keep up with the rising costs. A trip from Mirpur’s 60 Feet to Farmgate would cost Tk 70 before, whereas now, Nazer charges up to Tk 120 on this route.

“Our lives on Tk 8,000-9,000 then, and now on Tk 14,000-15,000 remains the same. That’s due to the higher prices of essential products. But our lives haven't seen any improvement or decline.”

PRICE HIKE ONSLAUGHT

In Bangladesh, numerous people lost their jobs during the pandemic between 2020 and 2021, while some small business owners were forced to cut their losses and head back to their hometowns.

According to the Bangladesh Bureau of Statistics, or BBS, the average inflation rate has remained steady at 5.5 percent over the past five years.

In simple terms, a product that cost Tk 100 in 2017 would now be priced at Tk 131.41.

Dr Ahsan H Mansur, an economist and executive director of the think tank Policy Research Institute, disagrees with the inflation data provided by the BSS.

The data does not match the reality of people’s experiences, he said.

“We don't have a second source to check the government’s data,” he said. “But the commodity prices shown in information from the TCB seem to indicate a higher inflation rate than in other data from the government. The current situation suggests that inflation is very high and will only get worse in the future.”

Prices of fuel, cooking gas, medicines, electricity and public transport fares have risen significantly since 2017.

The Consumers Association of Bangladesh, or CAB, says the prices of all daily necessities, including rice, pulse, oil, salt, turmeric, pepper, vegetables, spices, have gone up more than 50 percent over the last five years.

Soybean oil now costs up to 38 percent more while palm oil prices soared 63 percent. On top of that, the price of beef rose by 15 percent, mutton 23 percent and domestic chicken by 39 percent during that time.

The fine varieties of rice cost 14 percent more than they did five years ago. Medium standard rice is 21 percent more expensive and prices of coarse rice went up by 22 percent.

INFLATION: A GLOBAL PLIGHT

But rising consumer prices are not just hitting the pockets of ordinary Bangladeshis. Inflation has been one of the notable fallouts from the coronavirus pandemic the world over.

As country after country entered lockdowns, the closure of factories and the overall economic slowdown caused severe disruptions to the global supply chain, driving up the costs of raw materials and their transportation.

Consequently, consumer prices have been on an upward trajectory, which together with fresh threats from COVID-19 variants and a rise in debt, and income inequality could endanger the recovery in emerging and developing economies, according to the World Bank’s latest Global Economic Prospects report.

In the US, consumer prices rose firmly in January, leading to the biggest annual increase in inflation in 40 years.

Meanwhile, inflation across the 19 countries that share the Euro picked up to 5.1% in January from 5% in December, a new record high, defying expectations of a big drop and piling pressure on the European Central Bank to finally admit that price growth is not as temporary and benign as it has long predicted.

However, Kristalina Georgieva, the head of the International Monetary Fund, believes it is "too early" to say if the world was facing a period of sustained inflation, but warned that failure to make economies more resilient to future shocks could lead to big problems.

As global demand began to show signs of recovery in 2021, a rise in energy costs dented some of the optimism. And with Russia's military incursion in Ukraine, concerns are growing about its implications on the global energy market.

When Russia, the world's second-largest crude oil producer, launched its invasion of Ukraine last week, oil prices skyrocketed and briefly rose above $100 per barrel for the first time since 2014. Although prices moderated somewhat over the following, experts warn that it could rise to more than $130 amid the fallout from the conflict.

[Written in English by Syed Mahmud Onindo and edited by Turaj Ahmad]