As the capital of Bangladesh, Dhaka is the only city in South Asia to get ranked in the top 100 most expensive cities to live. According to the Centre for Policy Dialogue (CPD), living expenses in Bangladesh has risen to the extent where many households are struggling to maintain a basic standard of living on budget constraints. Inflation, surge in fuel prices, increased food cost, higher living expense etc. are creating obstacles in living in this area peacefully.
Centre for Policy Dialogue (CPD) calculated the cost of living in Dhaka for the month of May this year. According to the findings, a one-bedroom flat for four people with a “normal diet” typically cost around Tk 42,548 outside of the city center and Tk47,182 inside of it per month. After the increase in fuel costs, these expenses went up even more. After June, the gas prices increased by 22.78%. All these have been affecting the standard of living. Notably, in June 2022, inflation spiked to 7.56 percent, the highest level since July 2013.
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The average inflation rate over the previous five years has stayed constant at 5.5 percent, according to the Bangladesh Bureau of Statistics (BBS). According to CPD, there are differences between the official data on inflation and the market’s actual prices for various goods.” Official inflation statistics frequently misrepresent the state of the market. Over the past year, the cost of necessities has increased by more than 40%, yet this increase is not represented in the inflation data” as they stated.
THE INCREASED LIVING EXPENSES
People are experiencing the effects of the rising cost of living everywhere. For families living in the city center (Dhaka) with a one-bedroom apartment on a regular diet cost around Tk 47,182 per month. The typical cost of living for a family of four eating a “normal” diet and residing outside of the city of Dhaka in a one-bedroom flat would be about Tk 42,548, including non-food costs like home rent. If the family makes some sacrifices or stops eating animal protein, their costs go down to Tk 29,206. The price surge is visible in every sector including rent, food, education, utility bills etc.
With the increasing prices, it is becoming impossible to maintain the expenses with a fixed income. Dr Fahmida Khatun, executive director of CPD stated “Apart from the high price of the basic food items, the soaring prices of non-food items is putting a huge burden on households. Crowd-sourced data shows that maintaining even a modest standard of living was becoming prohibitively expensive for households in Dhaka”.
Middle-class households are likewise having a difficult time getting by with their limited resources, along with low-income families. They are being compelled to use their life savings in order to survive rather than investing in the future. The increased costs are making it harder for consumers to handle medical expenses, mishaps, or celebrations. They are inevitably turning to loans.
Fixed-income city people, including both middle-class and lower-middle-class households, are having a very difficult time dealing with the actual issue of city housing costs. The primary causes of the rise in rent are the rising costs of necessities like utilities and food. Owners assert that when the cost of gas, water, and other commodities rises, it is necessary to raise the rent. Even after the pandemic had caused a large number of city residents to vacant houses, official figures reveal that Dhaka housing rents continue to rise, unabated by good or bad circumstances.
In the last five years, rent increases in the capital were reported at a rate of 29%, which makes it difficult for people with middle and low incomes. According to a new report by the Bangladesh Bureau of Statistics (BBS), the Covid-19 pandemic hasn’t even been able to stop the rise in home hiring in the city of Dhaka, where rent increased by about 5.0 percent between June 2020 and June 2021.
From data obtained by interviewing individual from various location, the following was found
- In Bashundhara R/A (Block C), an apartment of three bedrooms used to cost BDT 31,000 in 2017. Now the rent for the same apartment is BDT 34,700.
- In Dhanmondi-28, the rent of a three-bedroom apartment was BDT 35,000 five years ago. But now, it charges BDT 39,000 for the same apartment.
- In Baridhara DOHS, the house rent was BDT 44,000 for a 1300 sqft apartment in 2017, which now costs BDT 49,000 to the tenants.
- In Uttara (Sector 5) the rent for 1200 sqft apartment was BDT 24,000 in 2017 which now costs BDT 30,000.
The BBS found that the rate of house rent growth in the capital was 28.53 percent. This happened because there were more people living in the Bangladesh’s megacity without an effective landuse and settlement policy. The average annual increase in rent in the Dhaka city is 5.71%, whereas the national increase is more than 4.25%.
The house rent index (HRI) was 4024.92 in the fiscal year FY2017, but it increased to 5111.66 in the first three quarters of the most recent FY2021. According to the BBS poll, the HRI in the city of Dhaka increased to 8320.9 in June 2021 from 7988.45 in June of 2020. Both in Dhaka and across the nation, the trends in rent escalation for the lower-middle and middleincome groups were higher than in the higher-income group.
According to analysts, the relentless increase in housing costs has already put strain on the city of Dhaka’s migrant residents, and this has a variety of impacts that ultimately results in less money being spent on consuming nutrient-dense foods. They estimate that the cost of housing in Dhaka consumes even half of some middle- and lower-income groups.
INCREASING FOOD EXPENSE
As per CPD the high inflation is a direct threat to the food security of people who make the minimum wage. It is because these individuals can’t afford either a standard diet or a diet with less food. The analysis shows that while the basic wage went up by 5% each year since the last wage evaluation, the minimum wage for all workers in 2022 would not be enough to feed a family of four on a regular basis.
According to government statistics, almost all daily necessities saw price increases in the city’s kitchen markets in August 2022, some by as much as 20–28%. Since the last few months, there has been an exorbitant increase in the price of rice, atta, eggs, broiler chicken, palm oil, and sugar in the markets. Prior to the increase in fuel oil prices on August 1, data from the Consumer Association of Bangladesh showed that the price of the coarse variety of rice was Taka 55–56 per kilogram. However, in current market (September), the price of the item increased to Taka 60–65 per kilogram. The cost of a kilogram of the good kind of rice climbed to Taka 75–80 from Taka 66–72. A packet of 2 kg Atta and flour (Moyda) currently costs 125 Taka and 150 Taka respectively.
In a single week in August, prices for rice, atta, sugar, and palm oil climbed by 5.11–8.16 percent, 10.20 percent, and 9.88 percent, respectively. The state-owned Trading Corporation of Bangladesh (TCB) reports that in August 2022, the prices of eggs and broiler chicken both increased significantly by 28.05% and 16.42%, respectively. Market analysts and economists predicted that due to strong inflation, commodity prices will rise even further.
The current price of broiler chicken is TK 260- 280 a kilogram, which was TK 160–175 a kilogram a month ago. Price of eggs increased to TK 48-52 a Hali (four pieces) in September, which was TK 40-42 a Hali on August.
The prices of all the vegetables increased by TK 15-20 a kilogram in the past month in the city markets. Now in market, onion costs 48-50 Taka per kg, potato costs 32- 35 Taka per kg, green chili costs 32-35 Taka (250 gm), pointed gourd 65-70 Taka per kg, lady’s finger or Okra costs 70 – 80 Taka per kg, green papaya costs 50- 56 Taka per kg, sweet pumpkin costs 50- 60 Taka, long bean costs 90 – 100 Taka per kg, local bitter gourd costs 90 -100 Taka per kg, cucumber costs 55- 60 Taka per kg, Lemon 40 Taka per Hali. Consumers have voiced their dissatisfaction about the unusual price increases for basic goods. Following the rise in fuel oil costs, their families’ daily food expenses climbed by 20–30%. Workers in industries like shrimp, fish, and trawlers, hotels and restaurants, soap and cosmetics, tailoring, cotton textile, bakery, biscuit and confectionery, auto workshop, and leather and footwear wouldn’t be able to eat even a mediocre diet on the minimum wage. For instance, a bakery worker earning the current minimum pay of Tk 6, 716 cannot afford the Tk 8, 016 monthly cost of a compromised diet. A textile worker who makes the minimum income of Tk 9,312 per month can support a mediocre diet, but he cannot afford the Tk 21,258 cost of a regular diet.
INCREASED UTILITY PRICES (GAS, ELECTRICITY & WATER PRICES)
With the increasing cost and inflation, the utility bills are increasing as well. Govt. is being forced to increase the selling prices as the buying prices are hiking due to global emergencies. Higher costs of importing primary fuels are affecting the country and the citizens. The rising prices around the world are a big reason why Bangladesh and other countries have to spend more foreign currency than before.
Gas price hike
Gas prices have climbed by an average of 22.78 percent for consumers. The monthly gas cost for non-metered household has increased. Consumers currently pay 990 Taka for a single burner and price for double burner has increased from Tk 975 to Tk1,080. Additionally, prepaid meter consumers now have to pay 18 Taka per unit (cubic meter), a 43 percent price hike. The average weighted price of gas has increased from Tk 9.8 to Tk11.56 per cubic meters.
Electricity price hike
Electricity prices have increased 9 times in the last 12 years in the country. Prices at the wholesale level increased by about 118 percent and at the consumer level by more than 90 percent during the said period. The last price increase was in February 2020. At that time, the government’s subsidy was estimated at Taka 117 billion. While adjusting subsidy, the price at the wholesale level was increased by 8.39%. At the same time, prices at the retail level were increased by 5.3 percent. At the general consumer level (retail), the price of electricity per unit is 7.13 Taka.
55 to 60 percent of the country’s total electricity is produced with gas. Generally, if the price of fuel increases by 10 percent, the price of electricity is increased. Under the pretext of BERC’s increasing of natural gas charges and an increase in oil costs on the global market, the state-run Bangladesh Power Development Board (BPDB) requested a roughly 66-percent increase in bulk power tariffs. Customers should prepare for yet another increase in their electric bills as the government is considering increasing the price of power once more in October in order to reduce subsidies and prevent further loss of the nation’s foreign exchange reserves.
Water price hike
The Dhaka WASA has increased water fees for residential and commercial purposes by 5% amidst the rising costs of basic commodities. In the previous 14 years, the cost of water has increased at least 15 times.
Up until August, the cost of a unit of water for domestic and commercial use was Taka 15.18 and Taka 42, respectively. From September, a 5% tariff is imposed to these prices.
Residential Dhaka WASA customers had to pay 15.18 Taka for every 1000 liters of water up until August. Water will now cost 19 Taka for 1000 liters. On the other hand, the cost of water for a commercial connection was Taka 42 for 1000 liters. The cost of water for business connections is Taka 50, as per the latest WASA plan
INCREASED TRANSPORTATION COST
The fuel oil prices were increased in line with the international market. Thus, government had to increase the fuel price by 51 percent. Currently, diesel and kerosene cost Tk109 per litre, petrol Tk125, and octane Tk130. Following this, the authority raised the prices for diesel-powered buses and minibuses traveling on long and inter district routes by 22% to Tk 2.20 per kilometer from Tk 1.80.
In Dhaka and Chattogram, the intra-bus fare is Tk 2.15 per km, and for long-distance buses, it is Tk 2.45 per km. With all the increasing fares of bus, CNG and cars, the rickshaw fares have increased too.
The unbearable hike in basic costs have forced the rickshaw pullers to increase the fares. Moreover, the rent for rickshaw has also increased to 50-70 TK by the rickshaw owners. As a result, fares have increased Taka 10 to 30 on average. Therefore, the prices of all transportations have increased. Many people now walk more to save money from the increasing transportation cost
While Dhaka’s housing costs are significantly greater than those in other cities, the city’s two municipal corporations also impose the lowest holding taxes on city structures. While Chittagong and Rajshahi impose holding taxes of 17 and 27 percent, respectively, Dhaka South City Corporation (DSCC) and Dhaka North City Corporation (DNCC) only impose 12 percent.
According to Section 20 of the Municipal Taxation Rules of 1986, the municipal corporations of Dhaka charge a holding tax of 7% on the annual value of structures, 3% for lighting, and 2% for conservancy. Beginning in July 2022, Dhaka North City Corporation increased the holding tax in the capital’s Gulshan, Banani, and Baridhara. If the ruling goes into force, the rent in these three upscale neighborhoods will increase by 33 percent, from Taka 18 to Taka 24, per square foot.
In both DSCC and DNCC, there is a possibility of altering the holding tax in accordance with the house rents. Tenants would suffer as a result, as the rents for houses could climb even more as a result of this increase.
BURIAL COST INCREASED
Along with civic services, including the cost of gasoline, oil, and other necessities, the price of graves have gone up. The Dhaka North City Corporation has raised the cost of re-burial in a reserved grave by Taka 20,000 at Banani Graveyard and Taka 10,000 at other cemeteries.
Previously, it would have cost Taka 30,000 to bury a relative in a reserved grave at Banani Cemetery; now, it would cost Taka 50,000. The charge for the remaining five cemeteries – Uttara Sector-4, 12 and 14, Martyred Intellectuals’ Graveyard in Mirpur, and the graveyard next to Rayerbazar Badhyabhumi— has raised from Taka 20,000 to Taka 30,000. However, the cost to bury a poor person in a common grave has been reduced from 500 to 100 Tk.
Additionally, there is no chance of expanding the space in approved cemeteries in Dhaka city. The city corporation is therefore discouraging grave preservation in these cemeteries. As a result, the North City Corporation set a price of TK 1.5 crores for 25 years of cemetery preservation in the Banani Cemetery, which is located in the North City Corporation territory. Furthermore, one must save 1 crore to preserve the cemetery for 15 years.
CAN THE PRICES BE CONTROLLED?
The poor and low-income people have been having a hard time since Covid-19 broke out in early 2020. Now, the prices of necessities are going up even faster than before. As a result, a sizable portion of the population is still struggling to make ends meet. It is having an impact on the economic recovery process.
Consumers Association of Bangladesh (CAB) Chairman, Dr. Ghulam Rahman suggested that the government should build public housing to rent to low-income, middle-income, and lowmiddle-income people in Dhaka city. Additionally, the government may undertake various housing projects that will provide inexpensive apartments for residents of Dhaka and other developing cities around the nation.
The economist advised the government to promote the rules and regulations so that both customers and homeowners would be aware of how to comply. As everyone has the right to a roof over their head, many urban planners and housing industry professionals advise expanding PPP real estate initiatives based on sensible landuse and housing policies to provide inexpensive and high-quality apartments for the working class and middle class.
CPD Research Director Khondaker Golam Moazzem said, “The role of the Bangladesh Competition Commission needs to be strengthened, particularly in the case of the essential consumer goods market. The Commission should develop a database, regularly monitor the dominant market players’ operations, examine the market control and manipulation (if any), and take proper measures.”
The National Board of Revenue (NBR) could perhaps think about removing the advance income tax, advance tax, and regulatory duty on all essential food items that were brought in from other countries right away. To deal with the crisis, we need wise fiscal and monetary policies that meet the need for higher subsidies and incentives in a few key areas. It requires better ways to use domestic resources, less wasteful spending, and social protection for the poor