Taming inflation, ensuring good crop prices pose dilemma

Mitigating pains of inflation and ensuring good prices for farmers by the same stroke pose a dilemma for finance officials in preparing national budget, leading them to walk a tightrope.

This moot question dominates during consultations of the finance minister with top officials of ministries concerned before he gets down to cobbling his maiden budget incidentally amid daunting problems specially on commercial and financial fronts.

Finance Minister Abul Hassan Mahmood Ali sat for such a pre-budget consultation Sunday, where the ministry for commerce and the ministry for farmers respectively placed their demands that relate to the aforesaid critical balancing, sources said.

According to the sources, commerce secretary Tapan Kanti Ghosh at the meeting said people are under tremendous pressure for high prices of essential commodities.

"The government needs to device polices and take appropriate measures in the next budget so that commodity prices go down to a tolerable stage," he was quoted as saying, as prices mark phenomenal rises economists say not merely for supply crunch but largely for supply-chain manipulation.

In this case he has suggested lowering duty as much as possible to facilitate lowering prices of commodities at import stage so that people can get items at low prices.

In the recent months the point-to-point inflation rate remained over 9.5 per cent, causing severe hardship to lower-and middle-income groups of people. Data available with the Bangladesh Bureau of Statistics (BS) show that food inflation rose to 12.54 per cent in August 2023-the highest in 12 years.

Amid such agflation, people were seen searching for trucks which sell commodities at subsidised rates. However, the government arrangement in this regard was found not enough to feed the increased number of people who fall prey to the mounting inflation.

Recently, the Prime Minister asked the officials concerned to take steps for lessening commodity prices as people are bearing the brunt of higher inflation.

At the meeting with the finance minister, sources said, agriculture secretary Wahida Akter made a point that if the commodities were imported at lower prices through lessening import duties, farm prices will fall and the local farmers will incur loss against their production costs.

"Interests of farmers ought to be kept in mind before taking any measure because good prices have to be ensured for the growers. Otherwise, the farmers will be discouraged from producing crops, which will have severe impacts in the long run," the official was quoted as saying.

Contacted Monday, a finance-division official said the government has to ensure interests of both groups-the consumers and the growers-at the same time, which is a "tough task".

He mentions that the government has taken $4.7 billion worth of loans from the International Monetary Fund (IMF) in a lending package wherein lessening subsidy remains as a major condition. "The IMF has since been pushing to lessen agri-subsidy let alone raise it further."

The official finds one option for ensuring crop prices to growers and that is by raising subsidy for them so that they do not feel the hit from the import- duty cut. "But enhancing subsidy may not be possible due to the IMF conditions," he says.

Another top finance official told the FE timely management of seasonal tax is the only way-out to keep inflation under control and ensuring crop prices for the growers.

Citing example, he said when crops are grown aplenty, the government keeps import restricted or controlled by imposing high tax so that price does not fall and growers are not affected.

On the other hand, when local production falls and prices go up, the government should grant seasonal tax exemption so import is encouraged to lessen inflation.

"The finance division received the proposals from both ministries and will consider while preparing the budget," he says.

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