Inflation on upward climb

Inflation jumped in July on a point-to-point basis mainly because of
soaring food prices. The rise breaks with low inflationary pressure
that continued through June this year. Experts blame volatility in the
international commodity markets for the rise in the inflation rate.
According to Bangladesh Bureau of Statistics ( BBS), inflation jumped
to 3.46 percent in July from 2.25 percent in June. Food inflation
increased to 3.34 percent in July from 0.25 percent in June.
However in case of non-food items, the rate was down to 3.74 percent
in July from 5.94 percent in June. People in urban areas faced extra
inflationary pressure for food compared to rural people. Inflation
rate in urban areas reached 4.14 percent in July, which was 0.71
percent in June. In rural areas, the inflation rate was 2.99 percent
in July, up from 0.05 percent in June. Zaid Bakht, research director
of Bangladesh Institute of Development Studies, said although the
domestic supply side was not in a bad shape, volatile commodity prices
in the international markets have added to the inflationary
pressure. "The government should monitor the global market on regular
basis so it (the government) can make a buffer stock by importing
essentials when the prices are low in the international market," he
said. Citing the recent price hike of sugar and edible oil, he said
such a situation could have been contained, had the government stored
the items earlier when their prices were low in the global market. He
said the global commodity prices went down significantly in July 2008
due to recession, but the prices then went up in July 2009 as
economic crisis began to ease. So the increased prices of essentials
in the global market in July 2009 had an impact on Bangladesh's
commodity market, Bakht said. "The government should increase
production capacity to rein in inflation," suggested Uttam Kumar
Deb, head of research at Centre for Policy Dialogue (CPD). He said
the government should take measures to minimise production cost.
"Fertiliser price cut could be a way to reduce production cost," said
Deb. Inflation crossed a record 12 percent in fiscal 2007-08
during the regime of the last caretaker government. Food inflation
also soared to 14 percent during the period. The caretaker government
faced a high inflation because of an abnormal price hike of oil (
petroleum) and food items in the international market. The
inflationary pressure also mounted then by lower domestic production
of crops caused by cyclones and floods. According to Trading
Corporation of Bangladesh, prices of most of the essentials increased
in the last one month.