Rising inflation in Bangladesh: A land of the future poor

Published : Friday, 9 September, 2022 at 12:00 AM  C

Sakir Mohammad

Will you be able to maintain your current standard of living if inflation in Bangladesh increases by another 2%? If the answer is negative, you are part of the future poor of Bangladesh. The current state of the global economy makes inflation unavoidable. The inflation rate in Bangladesh was 5.36 percent in July 2021 and increased to 7.56 percent in July 2022, according to the Bangladesh Bureau of Statistics.

Multiple factors have caused this spike in the inflation rate over the years. The global politics surrounding the Russia-Ukraine war, the impact of the sanctions, and the EU policy have cumulatively affected Bangladesh's economy. Until recently, the cost of a kilogram of rice was about 40 BDT; today, that price has skyrocketed to 80 BDT. Considering this perspective, your earnings might have remained the same, but your expenses have increased two times or more. Ultimately, you receive only half of what you paid for. Besides, the recent hike in fuel prices will considerably impact inflation because it has wide-ranging effects on everyday living.

Your possibility to endure inflation will depend on how smartly you manage your finances. In less than two years, we have experienced a global pandemic, growing living expenses, inflation, and, most recently, the Russia-Ukraine war. If these incidents have taught us anything, it is that no matter where you live, global occurrences can have a catastrophic effect on your finances and savings.

Wheat import

However, your next roadblock may seem more like a pebble than a sinkhole if you manage to put together a rainy-day fund with a little planning. Financial experts advise following the three-month or six-month rule, which suggests that if your monthly housing, food, and bill costs 50,000 BDT, you should aim to save 1,50,000 BDT for an emergency fund.

Additionally, there is a high possibility that you might lose your job adding insurmountable financial pressure. This is because the high rate of inflation will result in businesses and corporations incurring losses. To minimize the loss margin, laying off workers will become more common.

Therefore, we must comprehend our spending and create a sound financial strategy for ourselves. Blaming the government alone will not solve the problem. It is high time for all of us to work together to restore the nation's economy. But at this point, is it even conceivable to revive the economy? If so, is doing it as simple as saying it?

One of the most critical challenges at the moment is the lack of money. The amount of dollars in Bangladesh's reserves have decreased making imports more expensive. Consequently, the rate of dollars rises daily. On the other hand, if we focus on our lifestyle, it would reveal that more than half of the things we purchase are imported. Our purchasing habits haven't changed despite the extreme scarcity of dollars on the market. As a result, we are paying more money out of our pockets. Therefore, it is on us to make an active choice of purchasing more local goods so let's go ahead and support some local businesses.

Due to the price hike, consumers are more inclined to stockpile various necessary goods because of the fear that future price increases might make those goods unaffordable. While this might seem like a naive attempt of surviving in the economy, the consequences can be fatal. The sudden increase in demand will result in a collapse in the supply chain resulting in an even higher price hike. Instead, we should subscribe to smart consumerism. One way of being a smart consumer is by using substitutes for products that are high in demand. This will drive down the demand for the specific goods, stabilizing the price. Striking the balance between demand and supply is going to be the key to sustaining the economy in the long run.

Aside from inflation, the energy crisis in the country has become a major area of concern. Bangladesh and many other significant countries are experiencing fuel and power shortages. Russia's invasion of Ukraine and the aftermath of the Covid-19 pandemic has increased energy prices for consumers and companies.

Consequently, Bangladesh is experiencing long hours of power outages. However, complaining about the heat and the major impact on businesses will not assist us in mitigating this crisis. The economy will continue to face repercussions due to the loss incurred by businesses. We have our fair share to contribute to minimizing the problem. While it might not seem like much, maximizing the usage of sunlight to finish our productive tasks can lift weight off of our power grids. Therefore, plan your day and start early.

While blaming the government may not solve the current problems, some governmental actions and policymaking have also been aggravating the situation. For instance, the sudden fuel price hike instead of a steady periodic rise has disproportionately affected more poor people.

Government should be transparent about the upcoming and current economic issues, and stop trying to be the dictatorial dad who can handle everything. It is essential to ensure that there is no information asymmetry among the citizens and the government which might prevent informed decision making.

The writer is a research associate of South Asian Institute of Policy and Governance (SIPG), North South University