‘Bizarre’ that prices have not dropped after import duties were eased: Farashuddin

The government should expand the capacity of its food stocks to tackle the situation, the former central bank chief said

Former Bangladesh Bank governor Mohammed Farashuddin is surprised that the government’s easing of import duties has not brought the price of imported goods down, labelling the situation ‘bizarre’.

The economist said the market is currently ‘under the control’ of middlemen. In order to break their influence, he advised the government to expand its food storage capacity, noting that though food production had gone up in 1974, it had not resolved the famine of the time.

The former central bank chief made the statement during a lecture on ‘Central Banking’ at the Bangladesh Institute of Bank Management on Thursday.

“The government is taking various initiatives to control inflation. Bangladesh Bank is also reducing the money supply as part of a contractionary monetary policy. To reduce prices, the government is giving duty exemptions at the import level. But, despite these concessions, inflation is not falling.”

“It is very bizarre for the seller to get the benefit and not the producer when duties are reduced. The price has not come down where the duty has been reduced.”

WARNINGS ABOUT MIDDLEMEN

Farashuddin blamed middlemen for the suffering of the common people due to the inflation despite the sufficient supply of food grain.

He recalled his experience during the famine of 1974 where middlemen still did business despite the mass starvation.

“The amount of food produced in the country in 1974 was higher than in the previous year of 1973 and the following year of 1975. Yet there was a famine because of the middlemen.”

“They are a source of irritation in trying to control inflation. They are very powerful. They pay no heed to the government’s grumbling. They refuse to yield.”

The former central bank governor said that ‘weapons’ must be used to deal with these middlemen.

“In order to get rid of this irritation, the storage capacity of the government’s food warehouses should be increased. Previously, there were stores of 1.7 million tonnes of food. Now it has come down to 1.5 million tonnes. It should be increased to 2.5 million or 3 million tonnes.”

“Inflation can be controlled if food is stocked and sold in the open market at low prices for three months. Through the TCB the sale of products can be increased further.”

Farashuddin blamed mill owners and ‘dishonest’ officials responsible.

“Due to them, the government’s paddy collection campaign has been failing for the past few years.”

“The government is not able to buy grain at the fixed price. Later, millers deliver grain to government warehouses. As a result, the country’s farmers suffer.”