Bangladesh food

Institutional failure causes high food inflation: CPD


A file photo shows bags of rice at a grocery store in the Kaptan Bazar kitchen market in the capital, Dhaka. Institutional weaknesses in pre-estimating the real demand for rice and non-rice products are responsible for the strong food inflation crisis in the local market since the start of the Covid pandemic, according to a study conducted by the Center for Policy Dialogue. – Focusbangla photo

Institutional weaknesses in pre-estimating the real demand for rice and non-rice products are responsible for the strong food inflation crisis in the local market since the start of the Covid pandemic, according to a study conducted by the Center for Policy Dialogue.

The CPD released the study report titled The First Reading of the State of the Bangladesh Economy in Fiscal Year 2021-2022 at a conference held Thursday at the CPD seminar room in the capital, Dhaka.

The headline inflation rate in October 2021 was 5.4% and food inflation was 5.3%.

According to the first reading, in 2021, the national rice production was 36,250 tons, reflecting the production growth of 4.77% compared to the previous year 2020, while the consumption demand of the year increased by 1.66% to 36,700 tons and the demand for defecation was 450 tons.

Local production to meet market demand has settled on reliance on imported commodities, which has influenced the domestic market price based on the rising world market prices, according to the study.

Such a crisis has offered a number of market players to take undue advantage of the higher market margin, which should be controlled by emphasizing the power of government authorities such as the competition commission to develop a database. in real time and improve the operational monitoring capacity of market players to overcome the crisis.

Rising poverty has driven changes in consumption patterns, especially of urban employed people and their families, and the timely import of rice should therefore be seen as important in short and medium term policies. .

The study also suggested promoting public investments in the agricultural sector to increase productivity to minimize the high costs of essential commodities by focusing on low-income households.

The government should also reduce the price of diesel to lower the cost of production, especially for the production of boro and other diesel-based agricultural products.

The first reading analysis of the performance of the external sector showed that the growth in export earnings is well above the strategic annual target, but masks worrying trends.

Export earnings grew 24.3 percent in the first five months of FY22.

In which, RMG’s export earnings growth was 23.0 percent while non-RMG export earnings grew by 30 percent during the period, according to the study.

However, the average growth in RMG export earnings is mainly explained by the increase in volume rather than by the increase in prices.

Local RMG exports to the European Union market against the background of the background value only increased by 8.9 percent and the volume increased by 7.9 percent compared to the price increase by an insignificant 0.9 percent while in the US market, exports increased 23.8 percent. cent and volume rose 19.8 percent in contrast, the price increase per dozen was only 3.3 percent, according to the study’s findings.

On the other hand, out-migration has resumed, with remittances showing negative growth in July-November of the current fiscal year, with a total of 24,086 migrants entering overseas labor markets.

However, the number is still lower than the corresponding number from the FY20 pre-pandemic exercise.

Bangladesh received the largest influx of remittances on record in FY21, $ 24.8 billion, at the height of the pandemic which underwent significant changes in the first five months of the ‘current year, when remittances suffered a decline of 21.0%.

However, this amount is 11.6% higher than that for the corresponding period of fiscal year 20.

According to the study, the balance of payments slipped into an awkward position despite robust export growth, the trade deficit increased significantly and rose from $ 3.49 billion to $ 9.09 billion over the years. first four months, against a background of higher import growth.

Given the negative growth in remittances, the current account balance also weakened further and ended up in negative territory.

For July-October of fiscal 22, the overall balance was $ 1.3 billion while the corresponding figure for fiscal 21 was 4.1 billion positive and the decline in the overall balance is also reflected in the foreign exchange reserve scenario.

At the end of FY21, Bangladesh had a reserve worth about $ 46.4 billion, which fell to $ 44.9 billion in November 2021.

In this regard, it should be recalled that the International Monetary Fund has raised the issue of the accuracy of accounting practices associated with estimating foreign exchange reserves, the CPD said.

Despite the improved performance of the BNR, revenue collection increased by 16.6% compared to the previous year, but the annual revenue mobilization target of 27.0% remains difficult.

Revenue collection must increase by 30.7% for the remainder of the fiscal year to meet the target.

Annual development program spending continued to maintain the status quo, while the share of allocation spent in fiscal year July-November 22 was 18.6%, which was better than the previous year. affected by the pandemic.

However, it was lower than in previous years.

In which, 20.2 percent of the allocated local resources were spent, and the use of project aid was only 16.2 percent while the health services division could only spend 6, 4 percent.

The budget deficit narrowed in the first quarter of FY22, according to central bank data.

The inflow of foreign aid to finance Covid, including the purchase of vaccines, around 46.7% of the budget deficit was financed by net external financing despite the below-average performance of project aid in ADP funding.

Net sales of NSD certificates decreased by 26.3% due to the buy limit and interest rates, which increased reliance on bank loans.

Credit growth to the private sector improved to 9.4% during the current budget period, but it was difficult to meet the target of 14.8% which was 8.3% at end of year 21.

Agricultural credit increased 12.6 percent in FY21, while rural non-farm credit disbursements increased by 50.7 percent.

However, in both cases, the recovery of disbursed credits was lower than that of the previous year, including those disbursed under the stimulus plans.

The study also suggested analyzing cash support disbursements, as the lack of definitions still deprives many entrepreneurs of stimulus facilities, according to the study.