Inflationary economy

Md Rezaul Karim By Md Rezaul Karim, 28th May 2012 | Follow this author | RSS Feed
Posted in Wikinut>Writing>Columns & Opinions

The bad governance and looting tendencies of the political stakeholders could make an economy vulnerable- Bangladesh is the example.

Inflation and Bangladesh

The current up trend of inflation rate is not good for Bangladesh’s economy, which is already roaming with luxury double digit. This is no way a good sign or indicator for economic progress, which the Government is aspiring. This must be stopped what is called the crazy horse of inflation, which eating up of peoples’ savings, home, food and future. We are already in doubt whether the projected Gross Domestic Product will be achieved in the fiscal year 2011-12, subject to the following conditions are met positively-
• If Bangladesh could indeed bring about positive fruits from its export of garments to India, which recently agreed upon between the two countries in a signed protocol;
• If the foreign remittance flow pour in regularly and satisfactorily;
• If infrastructural development is done as per plan;
• If utility services, like power, gas and energy could be ensured adequately;
• If proper investment from abroad, and local entrepreneurs could be achieved.

In both the demand and supply are under pressure due to unprecedented rate of inflation in recent year, particularly in the period of this government. On top of this phenomena the fear and speculation of inflationary rise due to wrong government measures or economic mismanagement and indiscipline inflation is inflamed. In this September 2011 inflation rate stood at 12%, which is 9.41% in India.

Reasons behind this inflation are as follows:
• Price hike in international commodity market, which incited the domestic market;
• Price rise of fuel oil also contributed to the commodity inflation in the domestic market;
• Weak monetary policy also increased money supply in the market;
• Counterfeit money is also contributing as a dormant factor;
• Government borrowing from private banks, approximately Tk. 10,00,00,000/- everyday and spending it to non-productive sector, mostly by paying government recurring or revenue expenditure, e.g., salary and maintenance of government offices and institutions;
• Military expenditure;
• Private banks losing its fixed deposits as the clients are withdrawing its fixed deposits to support the rising cost, so, liquidity is squeezing; The reason for clients withdrawal is partly related to unipay2you and speak Asia who cheated people with billions of Taka, for which Government could not deny its responsibility, more pathetic is some corrupt government officials also involved with this scams and got benefited. As people lost their regular hard earned resources, last resource is the future insurance fixed or term deposits which they keep for future.

In the last two years public consumption rate increased by 8%, which is 2% higher than the 2006-2007. This indicates the pressure on price levels due to level of demand factors.
Importing commodities from abroad, which was 40%, covered the deficiency between the Gross Domestic Product and public demands. This contributed much in affecting the non-commodity inflations.

To control this high inflation rate the following steps could be followed:
• Controlling of money supply and printing;
• In the last two years supply flow was much higher than usual;
• Private banks must control their loans;
• Government borrowing from commercial banks;
• Bangladesh should follow China and India in monetary policy strategy, which revised interest rates 12 times in the last 18 months; Bank of China revised two types of loan interests nine times.

So, Bangladesh Government must pursue drastic measures in controlling the inflation rate in order to have its budgetary goals and economic growth rate 8%. If it goes on like what is now, the government would never be able to achieve its goal of binding the inflation rate at 7.5%. If inflation could not been bottled up, the country would be in deep trouble, not the political leaders, as they have dual passports and links abroad to fly leaving the people in distress.

Tags

Economic And Social Issues, Economic Crisis, Economic Development, Economic Reformation, Economic Trends, Economically Vulnerable

Meet the author

author avatar Md Rezaul Karim
I am a teacher engaged with the Southern University Bangladesh. I Like to use my spare time by writing and reading. I take it as a fun and source of inspiration in pursuing knowledge.

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Comments

author avatar Pradeep Kumar B
28th May 2012 (#)

Great article. I think you have researched well before writing this. Thank you friend for sharing.

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author avatar Md Rezaul Karim
29th May 2012 (#)

A bit indeed. Great to read your comments Pradeep.

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author avatar koushikba
28th May 2012 (#)

Thanks for sharing such news Md.Rezaul Karim. It is true that Bangladesh is going through the economic recession. But most of the counties over the world are going through these economic draughts. We surely hope that we can overcome it and will come back with a bang.

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author avatar Md Rezaul Karim
29th May 2012 (#)

Thank you Koushikba for your well thought comments. And I am pleased to see you on my page. Hope to see you soon regularly.

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author avatar MAHATI
28th May 2012 (#)

It is not only conflicting for economics, It is also conflicting with socilal & political environment.
welcome for your study on this issue.

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author avatar Md Rezaul Karim
29th May 2012 (#)

You are right Mahati. Have you started writing yet? Let me check your page. By the way, thanks for reading.

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author avatar Sivaramakrishnan A
28th May 2012 (#)

I feel the main culprit is energy imports which impacts India as well. India makes millions of cars and two wheelers and imports 80% of energy needs. Unless renewable energy takes off in a big way, majority of countries will be in distress as oil and gas producing countries are few compared to majority importing them. Sadly, the best brains are into financial engineering, making money out of thin air! Thanks for the share, Karim - siva

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author avatar Md Rezaul Karim
29th May 2012 (#)

The adjustment is important here- dilemma no alternative of fuel usage, and on the other hand you can't stop industries, and they have positively correlated. Thank you for your wise comments.

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author avatar cnwriter..carolina
29th May 2012 (#)

Md this is another of your pages filled with such wisdom...thank you for sharing and being...

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author avatar Md Rezaul Karim
29th May 2012 (#)

It's always great to see you cnwriter, I appreciate your comments. Thank you.

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author avatar Nazneen Sultana
1st Jun 2012 (#)

I am awed with your tremendous valuable writing.

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author avatar Md Rezaul Karim
2nd Jun 2012 (#)

Great surprise and happy to see you Nazneen on my page, thank you for your kind comments.

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