The government is finding it increasingly challenging to control inflation, leaving citizens grappling with the widening gap between their stagnant incomes and ever-rising expenses.
In July 2024, inflation in Bangladesh hit a five-year high at 11.66%, a stark increase from 5.52% in November 2020. By December 2024, the rate stood at 10.89%, with food inflation alone surging to a record 13.80% in November 2024, signaling the severe strain on household budgets.
Bangladesh lags behind regional peers
While many South Asian countries, such as Sri Lanka, Pakistan, and India, have successfully reined in inflation, Bangladesh continues to struggle. Sri Lanka, which faced a staggering inflation rate of 67.4% in 2022, brought it down to deflationary levels by December 2024. Similarly, Pakistan reduced inflation from 37.97% in May 2023 to 4.1% by December 2024.
In contrast, Bangladesh has seen inflation remain persistently high due to a combination of market syndicates, money laundering, poor market management, and weak governance.
Key factors behind Bangladesh’s inflation
Market syndicates and corruption:
Syndicates manipulate supply chains to artificially inflate prices, exploiting consumers and earning windfall profits. Despite government efforts, the core issues remain unaddressed, with retail-level monitoring failing to tackle the real culprits—large-scale market manipulators.
Money laundering and dollar volatility:
Experts, such as Dr Zahid Hossain, highlight that rampant money laundering has destabilized the currency exchange rate, causing the local currency to lose value and increasing the cost of imports, including essential goods.
Ineffective policies:
Strategies like tightening monetary policy and market policing have shown limited results. Retailers have been targeted, while influential players in the supply chain remain untouched.
Global economic pressures:
The Russia-Ukraine war in 2022 exacerbated oil prices and disrupted supply chains worldwide, compounding inflation in Bangladesh, which was already recovering from the economic aftershocks of COVID-19.
Lessons from regional success stories
Countries like Sri Lanka have adopted bold reforms, such as:
Tightening Monetary Policy: Increasing bank interest rates to curb liquidity.
Fiscal Discipline: Reducing budget deficits through austerity measures.
Market Liberalisation: Boosting industrial and agricultural production while increasing competition.
Pakistan and India have similarly kept inflation in check through robust fiscal and monetary interventions.
Solutions for Bangladesh
Enhancing Market Transparency:
The government must establish a transparent system for monitoring supply chains and price-setting mechanisms.
Breaking Syndicate Control:
Targeting dominant players in the supply chain can prevent price manipulation.
Stabilising the Exchange Rate:
Efforts to curb money laundering and stabilize the dollar exchange rate are essential to controlling import costs.
Ensuring Energy Supply:
Reliable electricity and gas supply to industries can lower production costs, reducing prices of essential goods.
Encouraging Market Competition:
Creating opportunities for new traders to enter the market can break monopolies and drive down prices.
The way forward
Economists argue that comprehensive measures are needed to stabilize the market. Dr Zahid Hossain suggests that market transparency, competition, and addressing extortion in supply chains are critical to reducing inflation.
Meanwhile, citizens face growing hardship as daily necessities remain unaffordable. According to the Consumers Association of Bangladesh (CAB), the government’s weak market supervision and reluctance to acknowledge syndicate dominance are worsening the crisis.
Unless urgent and effective actions are taken, inflation will continue to erode the quality of life for millions in Bangladesh.