by Saifan Shakhaoat 6 June 2022
In many countries, inflation has reached levels not seen in decades, even some specialists are worried about a global return to the 1970s’ chronic inflation and recessionary environment.
Since 2014, South Asia had maintained the distinction of “world’s fastest growing region” unchallenged, until East Asia and the Pacific overtook it in 2019. South Asia’s economies are already deteriorating, with the recent COVID tragedy, along with the Ukraine war, driving inflation rates to all-time high in the region, owing to downgraded forex reserves and severe supply chain disruption.
Wave in South Asia
With a quick peek at the alarming inflation situation, Pakistan, a South Asian country, experienced a two-year high of 13.4 percent rate in April of this year. Fresh food products and a rise in core inflation rate drove the country’s economy in critical condition as per country’s Central Bank. Pakistan’s electricity costs are already more than twice as much as India’s and Bangladesh’s that engaged with further production cost increment.
Nepal, a south Asian neighbor of Bangladesh, has received distressing news that its citizens are suffering a rise in food and energy prices with annual retail inflation reaching a five-year high of 7.28 percent in the month through mid-April. Despite having enough foreign exchange reserves to cover around six months’ worth of imports, Nepal may face difficulties if global oil and food prices remain high for an extended period due to the Ukraine-Russia conflict.
Annual inflation in the island nation Sri Lanka rose to a record 33.8% in April, according to government data released recently, with food inflation at an even higher 45.1% six times the 5.5 per cent inflation of a year earlier. Inflation is likely to rise in further as fuel price hikes of 35 percent for petrol and 65 percent for diesel — commonly used in public transport.
According to figures issued by India’s National Statistics Office (NSO), inflation in April hit a new high of 7.79%, nearly double the rate that the central bank must maintain for the economy to function smoothly.
How about Bangladesh?
Bangladesh’s burgeoning economy has also been rocked by the global inflation storm. Bangladesh’s annual inflation rate increased to 6.29 percent in April from 6.22 percent the previous month. The food price hike is a major factor in this. In March, food costs increased by 6.34 percent while non-food prices increased by 6.04 percent.
Bangladeshi government is taking a much more targeted approach to reducing global inflationary pressures, ranging from export prohibitions to pricing regulations. In the midst of a worldwide economic slowdown, Prime Minister of Bangladesh has urged on the people to embrace austerity and be cautious about spending during a meeting of the National Economic Council.
The VAT on refined soybean, palm, rapeseed, canola, and olive oil imports has been removed to assist people who are struggling to purchase essentials. Rice bran oil export has previously been prohibited. Market surveillance has intensified as a result of the government’s efforts to combat against price hike. Within the fiscal year (FY) 2024-25, the government has produced a draft roadmap to increase local edible oil production by over 200 percent, meeting at least 40% of the country’s entire need.
To combat growing market prices for key commodities, the government has begun supplying foodstuff at subsidized rates to low-income families. Despite the prohibition pronouncement, the administration has already managed to negotiate with neighboring India to import wheat through government-to-government procedures.
The government is also attempting to halt the loss of foreign reserves which is now $42 billion, by prohibiting superfluous imports. Apart from deterring superfluous imports, Bangladesh has imposed an additional tax on non-essential, expensive items. The Authority claimed that the higher charge will help grow indigenous companies, conserve vital foreign exchange reserves, and raise revenue. Government has restricted practically all official travels abroad by government as well as staff of autonomous, state-owned, semi-government institutions and banks to save foreign reserve. Projects with significant import components have been postponed as well. A few months will be added to the implementation of low-priority projects. As inflation in Bangladesh exceeded the central bank’s target by a small margin, the central bank increased LC margins dramatically to curb luxury imports as well as set policy rate at 5 percent to lower cashflow in the market.
However, due to trade dependence, no country can escape the global wave of inflation in today’s age of globalization, even if it uses every available option. Though Bangladesh’s prudent inflation-fighting strategies are producing excellent positive results in the short term, no country can avoid long-term threat in residents’ basic food baskets if a time-sensitive cooperative effort is not initiated heretofore. Now is the moment for the entire globe to band together to battle growing inflation by avoiding violence, protecting the environment, and enforcing fair trade practices.