The World Bank (WB) Group President David Malpass recently presented a bleak scenario of the world economy for the next two years. In his view, prices of commodities are not going to come down any time soon as the US and other advanced economies are at the moment witnessing unprecedented rates of inflation in decades. And the worst sufferers from its fallout would be as usual the poorer nations where the high inflationary trend may even give rise to instabilities, he further warned. And, he stressed that the shortages of key commodities including oil, fertiliser and wheat are the drivers of the price surge. In other words, according to the WB, the inflationary trend worldwide is due to fewer goods in the market than their demand.
But the June 7's press release of the WB presented yet another ominous picture of the world economy. It is that stagflation risk is rising as the Covid-related disruption in the world economy has been further compounded by the war in Ukraine which has contributed to magnifying the economic slowdown globally. That means the economic stagnation coupled with high inflation will continue indefinitely. This is real bad news for businessesas it will suppress demand while the consumers' suffering will increase as their purchasing power will erode substantially due to high inflation.
Against the backdrop, central banks of different countries are trying to arrest the galloping inflation by increasing the cost of borrowing money by way of increasing interest rate. In the USA, for example, the Consumer Price Index (CPI) in May rose 8.6 per cent compared to what it was a year before and 1.0 per cent in comparison to the previous month (April). The rate of the increase was three times of what experienced earlier, a development that flabbergasted economists as it defied their predictions.
Now that the Europe, or the entire world for that matter, as it is the advanced economies that dictate the world, is witnessing a war hysteria in the wake of Russian invasion of Ukraine, it is anybody's guess how things are going to unfold in the long run.
As it happened in the two past world wars, severe economic crises, such as the decade-long economic downturn in the USA, called the Great Depression, or the bankrupt German economy amid hyperinflation, one wonders, if the present world, too, is on the brink of an Armageddon as the parties in confrontation are mostly nuclear powers. However, people in the developing and the least developed world of which Bangladesh is part, who have no power to prevail upon the big powers beholden to their big egos, can only hope that good sense will finally prevail and that the world will remain a safe place for the next generation.
In the circumstances, as the poorer countries will be left to their own devices, they will have to increase cooperation among themselves to survive in such troubled times. How is Bangladesh's economy faring at the moment? In May this year (2022), for example, the annual inflation rate shot up to 7.42 per cent from the rate (6.29) during the same period last year. Notably, it has been the highest rise in inflation in eight years since 2014.Undoubtedly, the current food price hike (a rise by 8.30 per cent in May against 6.23 per cent in April) is behind this inflationary trend at this unprecedentedly high level.
So, signs are yet to be propitious to say that things are going to improve in the near future. In that case, Bangladesh government will be required to be judicious and play safe and avoid being ambitious in its economic growth planning until the time when the world political and economic situation becomes stabler. But first things first. The government's top priority should now be to ensure the country's food security. Though Bangladesh government claims that the country has no food shortage as there have been bumper harvests and that it has adequate stock of foodgrains, the price of staple food item, rice, in particular, is still on the rise.
To address the issue, the government has also meanwhile drastically reduced duties on rice import to encourage private importers so that the supply gap if any in the market could be met. But situation has hardly improved to the dismay of the government as well as the common consumers. The millers, wholesalers and retailers are blaming one another for this supposedly artificially created crisis in Bangladesh's foodgrains market.
Suspecting that hoarders are behind this artificial crisis in the rice market, a drive was launched to bring unscrupulous traders to book. But despite all such efforts, the bumpy rice market remains largely untamed. But whatever the reason behind this phenomenon, the fallout from it is that it is pushing up the inflation further. The people belonging to the fixed income group have already begun to feel the pinch. The self-employed low-income people are worse off, let alone the vulnerable section of the people.
As if to make matter worse, the standing crops on thousands of hectares of land in the northeastern districts of Sylhet and Sunamganj and other northern districts have been lost to the current flash flood. It is definitely going to impact the government's calculations about the stock and supply of foodgrains in the country. To ward off any further crisis in the market, the government should continue to replenish its foodgrains stock. At the same time, it should support private importers of foodgrains with fewer conditions and less bureaucratic tangles so that they can import more foodgrains within a short time to keep, especially, the rice marketstable.