The Bangladesh Journal - Bangladesh experiences intensifying inflationary pressures

Dhaka, May 3 : Government's anti-hoarding drive and lower than targeted production of food grains have driven point-to-point inflation to 7.43 percent in March from 7.28 percent a month ago. Higher inflationary expectations among businessmen also fuelled price increases.

The average rate of inflation surged to 6.94 percent in March from 6.84 percent in February, according to Bangladesh Bureau of Statistics.

A BBS estimate shows that both average and point-to-point inflation have been rising since January.

"The market became shy because of government's anti-hoarding drive leading to disruptions in supply chain. Lower than the targeted production of food grains such as aus and aman had also fuelled the prices of essentials," said a Bangladesh Bank senior official, seeking anonymity.

It is alleged that the anti-hoarding and anticorruption drives, launched by the interim government has affected supply chains of commodities due to shakiness among the businessmen. Production of food grains such as Aus and Aman in July-March of the fiscal 2006-07 dropped to 124.12 lakh tonnes from 125.55 lakh tonnes in the same months a year back, according to the food ministry and the Department of Agricultural Extension.

Lower imports of food grains during this period also drove prices up, the official added. Food grains imports declined to 17.08 lakh tonnes in July-March this fiscal from 19.41 lakh tonnes a year ago. Zaid Bakht, research director of Bangladesh Institute of Development Studies, linked the rise in inflation to higher inflationary expectations by traders. A rise in the prices of commodities such as edible oil in the global market and poor boro production outlook had encouraged businessmen to withhold their supplies, Bakht said. By contrast, government's spending on the annual development programme had created demand to some extent, he said.

"Inflationary expectations among the businessmen appear to be high. The government should step in to augment supply of commodities by increasing the involvement of Trading Corporation of Bangladesh in this regard," Bakht said.

Government's anti-hoarding drive and lower than targeted production of food grains have driven point-to-point inflation to 7.43 percent in March from 7.28 percent a month ago.