Runaway inflation puts food security at risk: Sanem

Sharply rising commodity prices are greatly endangering food security in Bangladesh, observed Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem), at a webinar on Thursday.

He identified the escalated prices of food, fuel and other commodities in the global market, domestic production shortage, anomalies in the local market, supply side issues, and currency depreciation as key reasons for the soaring inflation.

A declining trend in export and remittance receipts, a structural change in government borrowing – increasing short-term debts as compared to long-term ones, revenue earnings not matching expectations, high rate of defaulted loans, and less than necessary allocations in social safety net also are some loose ends of the economy, he said.

"The Bangladesh Bank should provide regular up-to-date information…If data is not updated regularly, its credibility will be questioned."

Selim Raihan, Executive Director, Sanem

He said poverty, inequality, employment, high cost of doing business, illicit money transfer, lower budget percentage considering the GDP, high amount of subsidies, weak capital market, and electricity generation concerns are the major challenges that the Bangladesh economy is now faced with.

The noted economist also thinks that there is a link between hundi and capital flight.

In reply to questions from journalists, he, however, said even though there are risk factors concerning food security, the situation has not yet reached the point where the country might face a famine-like situation.

He also warned that unscrupulous quarters always try to cash in on such propaganda by illegally hoarding essential commodities.

At the online seminar, "Current economic situation in Bangladesh: Areas of concerns and what needs to be done", Selim Raihan also discussed possible ways out of the current economic crises of the country.

He recommended raising allocations on social safety net to safeguard marginalised communities, and stopping the "bleeding" of forex reserves.

He suggested raising social security allocations by postponing some development projects if needed.

Selim Raihan thinks that the notification issued by the central bank over recent "rumours" about a liquidity crisis in banks is not enough.

He said the central bank should provide regular up-to-date information, identify any bank's problems and address them.

The message of whether the liquidity crisis varies from bank to bank needs to be disseminated properly, he added.

The government always says inflation is increasing not just in Bangladesh but in other countries too. But, citing inflation data from India, Vietnam and Indonesia apart from that of Bangladesh, he showed that inflation growth rates in these countries are much lower than that of Bangladesh. In October this year, when Bangladesh's inflation was 8.91%, the inflation rate in India, Indonesia and Vietnam was 6.77%, 5.71% and 4.30%, respectively.

Besides, raising the question of whether inflation is underestimated in Bangladesh, he said the Bangladesh Bureau of Statistics still uses 2004-05 weights to calculate inflation. Blaming the non-availability of proper statistics and data for not being able to take correct decisions on various aspects of the country's economy, he said no policy decision can be taken without proper data.

"If data is not updated regularly, its credibility will be questioned," he said, urging the responsible authorities to resolve anomalies in this case.

Fall in garment workers' income

Selim Raihan presented a survey report on workers in the garment sector to highlight the food security risks.

The survey, conducted on 1,300 garment workers in five regions of the country, shows that the food security of workers in this sector was 94% in April, which dropped to 86% in September.

In addition, the earnings of workers also declined during the period.

In April, the earnings of a female and male worker were Tk14,200, and Tk15,000, respectively, which came down to Tk11,000 taka and Tk12,300, in that order, in September. The report mentions that the reduction of working hours of workers (overtime) is responsible for this situation.

A woman worker used to work 286 hours in March, which came down to 239 hours in September. And the work hours of a male garment worker fell to 249 hours in September, from 297 hours in March, according to the report.