Leading decent life becoming expensive: CPD

The surging inflation in Bangladesh has sent living costs to such an extent that many families are grappling to maintain a decent life with limited budgets, said the Centre for Policy Dialogue (CPD) yesterday.

A four-member family requires at least Tk 29,206 to live in Dhaka even if they compromise on their diets. The amount is far below the minimum wages of labourers working in the industrial sector, it said.

In order to cope with the higher cost of living, the low-income families are forced to trim their lists, said the think-tank at a media briefing at its office on the state of Bangladesh's economy in the fiscal year of 2021-22.

"Apart from the higher price of basic food items, the high price of non-food items is putting a huge burden on households. Crowd-sourced data shows that maintaining even a modest standard of living is becoming prohibitively expensive for households in Dhaka," said CPD Executive Director Fahmida Khatun.

Inflation shot up to 6.29 per cent in April, the highest in 18 months. It was 6.22 per cent in March.

Based on the data of the Bangladesh Urban Socioeconomic Assessment Survey 2019 conducted by the Bangladesh Bureau of Statistics, the CPD said the cost of a basket of 20 common food items for a four-member family in Dhaka city was Tk 21,358 on May 30.

If the family never consumes fish, mutton, beef or chicken, the average monthly cost of food for the household would stand at Tk 8,016.

The average cost of living, including non-food expenditures such as house rents, for a household of four on a "regular" diet and living in an apartment with one bedroom outside the Dhaka city would be around Tk 42,548, said the CPD.

The expenses came down to Tk 29,206 if the family compromises or removes animal protein from its menu.

The CPD said high inflation is directly threatening the food security of workers earning a minimum wage as they are unable to manage either a regular diet or a compromised diet.

The analysis shows that assuming a 5 per cent annual increment in the basic salary since the last wage review, the minimum wage in 2022 for workers in all industries would not be enough to afford a regular diet for a household of four.

The workers of many industries such as shrimp, fish and trawlers, hotels and restaurants, soap and cosmetics, tailoring, cotton textile, bakery, biscuit and confectionery, automobile workshop, and leather and footwear wouldn't be able to have even a compromised diet with their minimum wage.

For example, an employee of a bakery, whose minimum wage now stands at Tk 6,716, can't afford the expenses of a compromised diet, which costs Tk 8,016 a month.

Although a garment worker, earning a monthly minimum wage of Tk 9,312, can afford a compromised diet, he is unable to bear a regular diet, which costs Tk 21,258.

"Hence, it is urgent to revisit and revise the minimum wages of workers in all industries immediately," the CPD recommended.

The struggle of the poor and the low-income groups that began with the outbreak of Covid-19 in early 2020 has now worsened by the unabated rise in the prices of essentials.

This is affecting the economic recovery process as a large section of people are still struggling to stay afloat, said Fahmida.

According to the CPD, though the current price hike is mainly due to higher import costs, domestic factors such as the market distortion by a few dominant players, are also responsible.

Fahmida said there are discrepancies between the government's data on inflation and the actual prices of commodities in the market.

"In most cases, official inflation figures don't paint the actual scenario of the market. The price of essential commodities has surged more than 40 per cent in the past one year, but it is not reflected in the inflation data."

The analysis shows that at least 29 imported essential food items currently face a high incidence of tax.

"High inflation has revealed the inherent weakness in the government's domestic resource mobilisation approach which is largely dependent on revenue collection from indirect taxes."

If the current pace of inflation continues, the government may be compelled to withdraw other indirect taxes on essential items like it did in case of soybean oil.

"Thus, the fiscal policy, which is highly dependent on indirect taxes, propagates economic inequality in society and forces the government to trade off revenue generation in the face of high inflation."

Prof Mustafizur Rahman, a distinguished fellow of the CPD, said the spike in inflation is not solely related to the rising global prices.

"There are anomalies in the total market management."

He said inflation may increase since Bangladesh can't control the foreign market and dollar prices.

"But if we can establish good governance, beef up surveillance and handle the market systems properly, inflation would go down significantly."

According to the CPD, Bangladesh's economy is facing several challenges owing to global political and economic crises.

"In the context of high inflationary pressure, deficits in trade and current account, the exchange rate volatility, and the pressure on foreign exchange reserves, macroeconomic management will be more challenging than ever before."

Handling the crisis requires prudent fiscal and monetary policies that will meet the demand for higher subsidies and incentives in a few critical areas, enhancement of domestic resources mobilisation, rationalisation of public expenditure, and ensuring of social protection to the poor.

"Policymakers will have to come out of growth obsession and focus on the quality of growth in terms of distribution of the benefits of growth more equally," said the CPD.