Bangladesh is grappling with a surge in commodity prices, causing widespread distress among its citizens. Food prices have soared due to market distortions, inadequate supply, and the government’s inability to regulate the market. With Ramadan ongoing, demand is only rising, leaving low-income households struggling to make ends meet. Addressing this multifaceted issue requires a comprehensive solution, writes SM TANJIL UL HAQUE
The surge in commodity prices in Bangladesh has become a matter of great concern for the general public. The country has been grappling with the high prices of essential goods for a prolonged period of time, and since the arrival of Ramadan, the situation has only worsened.
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While the rise in demand during Ramadan is one of the reasons behind the increase in prices, there are also other contributing factors, including market distortions, at play. The government’s lack of effective price control mechanisms and inadequate measures to regulate market practices have made the situation worse. This has led to a conundrum for policymakers and the public alike, as they struggle to find solutions to address the issue of the abnormal surge in commodity price
CURRENT SITUATION PORTRAYING GRIM PICTURE
The recent surge in commodity prices is creating a harsh reality for the general populace, especially the low and lower-middle income groups. According to the Trading Corporation of Bangladesh (TCB), the price of essential commodities such as rice, vegetables, and fish have increased by 24%, 12%, and 30% respectively compared to the same time of the previous year. According to the latest data, the average monthly household expenditure in Bangladesh increased by 13.72% from January 2020 to January 2022, according to a study by the Centre for Policy Dialogue (CPD). This increase is due to the increase in the prices of food and non-food items, including healthcare and transportation costs. The price hike in commodities is creating significant distress among the middle-class, who are already struggling to make ends meet due to the pandemic and war induced economic crisis.
THE PROTEIN PREDICAMENT
As prices of broiler chicken and eggs continue to soar, many low- and lower-middle-income families are left struggling to afford even the most basic sources of protein. The price of broiler chicken has risen to Tk225- Tk230 per kg, while broiler eggs are selling at Tk140-Tk160 per dozen – increased by 39% and 30% respectively compared to the same time last year. With Ramadan approaching, the price of these crucial sources of protein is expected to continue to climb even higher, adding to the already significant burden on low-income households.
SUGAR AND SOYBEAN OIL PRICES SOAR
As the prices of essential commodities in Bangladesh continue to rise, consumers are now facing even higher prices for soybean oil and sugar. According to recent announcements from the Bangladesh Sugar Refiners Association and the Bangladesh Vegetable Oil Refiners and Vanaspati Manufacturers Association, prices have increased by Tk12 and Tk13 respectively. As a result, consumers can expect to pay Tk190 for a one-litre bottle of soybean oil and Tk108 for 1kg of packaged sugar. The import of crude soybean oil and raw sugar, along with production costs, are said to be the main reasons behind the recent price hikes, causing additional financial strain for many families already struggling to make ends meet.
UNRAVELLING THE SURGE: IS IT DEMAND-DRIVEN OR SPECULATIVE?
As the holy month of Ramadan approaches, prices of necessities in Bangladesh have surged persistently, a phenomenon that occurs annually. One of the reasons behind the hike in prices of food items is the increase in demand before Ramadan. During the first week of Ramadan, the price indices keep climbing as demand increases. Later, prices start to come down modestly, and the kitchen market becomes somewhat stable. However, the way-ward market turns volatile in the third week of the month ahead of Eid-ul-Fitr, and the prices of items related to the religious festival of Muslims also increase. Although the supply-demand mismatch of various items, speculation also plays a role in the erratic price situation. Speculative behaviour of both buyers and sellers contributes to the surge in prices. Consumers anticipate that prices may increase in the future and purchase additional quantities of goods, creating pressure on the supply situation. Retailers and wholesalers also go for hoarding to create an artificial crisis, guessing that consumers would purchase more than normal. The speculative behavior of retailers and wholesalers leads to supply crunch and an increase in prices. There is also a strong perception that a market syndicate or nexus of retailers and wholesalers is another significant factor behind abnormal or sudden surges in prices of essentials, especially during Ramadan. However, this view is difficult to substantiate due to the large number of retailers and wholesalers in the market.
MARKET DISTORTIONS EXACERBATE PRICE HIKES
Several other factors contribute to the price hike of essentials in the country. Economies of scale allow big trading houses to import and store a bulk amount of goods and supply them to different retailers, reducing per-head cost. However, the presence of rent-seekers in the supply chain, backed by a section of political leaders and police, adds to the cost of supply in different stages. The government has extended its open-market sale for low-income people through the Trading Corporation of Bangladesh (TCB), allowing ten million low-income households to purchase selected quantities of food items using ration cards. While this is a welcome move, it also reflects that the regular market mechanism is not functioning correctly, and the government has inadequate control or supervision over the market of daily necessities.
Meetings with traders to keep prices stable, warning of tough action against so-called syndicate members, and assuring consumers about adequate supplies of commodities have yet to bring the desired outcome. The surge in prices of essentials in Bangladesh is a complex issue that requires a multifaceted solution to benefit consumers and keep the market stable.
EXPERTS WEIGH IN ON THE SOARING PRICES
Experts have different views on the current hike in commodity prices. Some believe that the high demand for meat and eggs is the main reason behind the surge, while others claim that it is due to speculation and price fixing. Economist said,
“There is no doubt that the increase in demand for meat and eggs is a major reason for the price hike. Besides, the recent outbreak of bird flu in India and some other countries has also affected the supply of chicken and eggs in Bangladesh, which has contributed to the price hike.”Dr Ahsan H Mansur
Executive Director, Policy Research Institute of Bangladesh (PRI)
However, he added, “At the same time, there might be some unscrupulous traders who are taking advantage of the situation and manipulating the prices.” Similarly, Professor Dr Abu Yusuf, a prominent economist, said, “There is no denying that the demand for chicken and eggs has increased in recent times, but it is not enough to justify the steep price hike we are seeing now.
There are some market players who are engaged in price fixing and rent-seeking, which is contributing to the rise in prices.”Professor Dr Abu Yusuf
University of Dhaka
According to Dr Akhtar Hossain, a professor at the Department of Agricultural Economics and Business Studies at Sher-e-Bangla Agricultural University, “The current price hike in chicken and egg could be a result of both demand driven and speculative factors.” He believes the pandemic could have led to increased demand for white meat, causing the price hike. However, he also suggests that speculative trading may be a factor as traders hoard stocks to sell at a higher price later.
“As prices continue to soar, some traders may be hoarding their stocks with the expectation of selling them at a higher price later”Professor Dr Akhtar Hossain
Sher-e-Bangla Agricultural University
As experts continue to debate the root cause of the current price surge, consumers are feeling the pinch. The government has already taken some steps to control the situation, such as increasing imports and cracking down on hoarding and price gouging. However, it remains to be seen how effective these measures will be in curbing the price hike and providing relief to the consumers.
MARKET ASSOCIATIONS TO FACE CONSEQUENCES FOR PRICE HIKES
Market associations will be held accountable for any abnormal price hikes in their respective markets, according to AHM Safiquzzaman, the director general of the Directorate of National Consumers’ Right Protection (DNCRP). The announcement came after leaders of the market associations demanded that the government include them in conducting market monitoring. The discussions were held to keep the prices of daily essentials stable and the supply situation normal during the upcoming month of Ramadan, which begins in late March. To prevent price hikes, 50 teams from the DNCRP will be working throughout the country, in addition to four teams from the commerce ministry. Safiquzzaman believes that both governmental and non-governmental bodies’ active regulatory participation is the key to a stable commodity market
HOLISTIC TACTIC REQUIRED TO CURB RISING PRICES
To ensure that price hikes do not continue, a comprehensive policy approach is needed. Bangladesh’s policymakers need to act promptly and explore alternative sources of essential commodities. The government must ensure adequate supply in the market through procurement from domestic and international sources. It is also necessary to increase the transparency and capacity of organisations responsible for distribution and market monitoring. Moreover, the government should focus on improving domestic resource mobilisation by collecting more direct income tax and increasing the tax net. Good governance must be ensured in case of public expenditures, and the government should use foreign exchange reserves cautiously. Inflationary pressure will not wither away soon, nationally or globally, and if not addressed immediately through appropriate measures, inequality will widen further in the country. Therefore, the government will have to adopt a holistic approach to deal with this crisis.
To conclude, the surge in commodity prices in Bangladesh is a complex issue that requires a multifaceted solution to benefit consumers and keep the market stable. While the rise in demand during Ramadan is one of the reasons behind the increase in prices, other contributing factors such as market distortions and speculative behaviour also play a role. Policymakers need to implement effective price control mechanisms and regulatory measures to address the issue of the abnormal surge in commodity prices.