2023 was the year of inflation

In Bangladesh, 2023 was the year of inflation. According to the Bangladesh Bureau of Statistics (BBS), inflation has consistently remained above nine percent since March. Food inflation was even higher, peaking at 12.56 percent in October—the highest in at least a decade. However, there is a question about the extent to which these official figures reflect the true picture of inflation.

Although the government has blamed the Russia-Ukraine war for price inflation, it was observed that even after the cooling down of the global commodity market, prices of daily necessities in Bangladesh did not decrease but increased instead, which indicates that local factors such as incorrect government policies and failure in market management are behind this inflation.

In general, this year's high inflation can be attributed to the massive increase in oil, gas and electricity prices by the government, depreciation of the taka against the US dollar, import controls due to foreign exchange reserve crisis, and the attempt to meet the budget deficit by printing money from the Bangladesh Bank. But the sudden increase in the prices of daily necessities such as eggs, chicken, onions, potatoes, sugar and oil cannot be justified using these issues alone. This abnormal price hike was caused by certain structural factors in the commodity market, namely: 1) the dominance of a few large business groups over the market; 2) lack of accurate statistics on the demand and production of essential commodities and the illusion of food self-sufficiency; and 3) inadequacy of government action to control the prices of essential commodities.

The presence of syndicates in the country's market has been in public discussion for a long time. But this year, prices of daily commodities increased so much that the presence of these syndicates became painfully obvious. In the span of just a few weeks, the price of broiler chicken increased by Tk 100 per kg, the price of eggs increased from Tk 145 to Tk 180 per dozen, the price of potatoes increased from Tk 40 to Tk 70, and the price for onions doubled overnight. Markets for sugar and edible oil also remained volatile throughout the year.

This would not have happened if the market was not monopolised by a few large businesses. For example, five companies dominate the sugar market, four companies control the edible oil market, and four companies rule the poultry sector. Meanwhile, owners of large rice mills are dominating the rice market. Only under such levels of monopoly was it possible to sell broiler chicken at Tk 80-90 more than the cost of production, while egg prices were manipulated through SMS and potatoes purchased from farmers at Tk 10 were put in cold storage and then sold at Tk 70.

This is why, although the prices for soybean oil, palm oil, sugar, flour, wheat, onions, lentils, chickpeas and peas decreased in the global market significantly from the prices when the Russia-Ukraine war first broke out, there was no price reduction in the Bangladeshi market. While ministers have acknowledged the existence of these syndicates on different occasions, no effective steps have been taken to dismantle them. 

Our ministers often claim that the country has become self-sufficient in food production. However, whenever food prices rise on the global market or India bans the export of rice, sugar or onions, the shortage of these commodities within the country catches one's eye more. The reason behind this is that, according to the Food and Agriculture Organization (FAO), Bangladesh has to import more than 12 million tonnes of food grains every year, making it the third-largest food importer in the world. But since the government lives under the illusion of food self-sufficiency, it cannot play a timely role in dealing with the crisis of food commodities within the country. 

It is due to this illusion that the government first took the initiative to export potatoes, boasting about record production, and then decided to import potatoes after not being able to control the price on the local market. According to data from the Department of Agricultural Extension (DAE), more than 3.4 million tonnes of onions have been produced in the country this year, against the annual demand of 2.6-2.8 million tonnes. Due to this excess production compared to the demand, the government did not take the initiative to import onions on time, making it possible for traders to create an artificial shortage of onions in the country and sell the essential food item at higher prices as soon as India declared an export ban.

The same problem exists in terms of the demand and production of eggs. According to the Department of Livestock Services, egg production increases significantly every year. But private sector data shows that egg production actually decreased by 14 percent between 2022 and 2023. Due to a lack of accurate information about the demand and production of eggs, the government has been unable to play a proper role in regulating egg prices.

The steps taken by the government to control prices of essential commodities this year were not sufficient or effective. It fixed the prices of oil, sugar, onion and potatoes, but could not enforce these prices. In times of crisis, it is necessary to increase the supply of daily commodities on time, stop traders from hoarding, and break up syndicates. Though the government sells some commodities at low prices through the Trading Corporation of Bangladesh (TCB), this cannot have much impact on the market due to the insufficient amounts of goods and the prevailing dependence on imports. In the end, to ease a supply crisis, the government mainly depends on the private sector—over which it has no effective control. Even though the market manipulators have been exposed from time to time, no effective action has been taken against them. This is why questions became more pressing this year regarding whose interests the government is protecting: the general people's or the big businesses'?

The government needs to ensure that the correct statistics for production, demand and supply of daily necessities (including food items) are available. Buying essential food crops from farmers during harvest season at fair prices and selling those during crisis periods at subsidised prices can also help us go around abnormal inflation. It is also crucial to reduce dependence on any single country for imports while also increasing local production. Most importantly, the dominance of large business groups over Bangladesh's commodity markets must end.

Kallol Mustafa is an engineer and writer who focuses on power, energy, environment and development economics.

Views expressed in this article are the author's own.

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