In the wake of rising inflationary pressures that largely hurt the country’s poor and middle-class, a renowned economist thinks that the Bangladesh Bank efforts to rein inflation will not going to bring results soon. “Anti-inflationary monetary policy is not going to impact largely in reining inflation,” said Dr Mustafa Kamal Mujeri during an interview with UNB staff correspondent Golam Moin Uddin.
He said there is a need to closely monitor the monetary activities as well as credit flow to ensure that production is not hindered in different sectors.
The country’s overall inflation in March this year reached a double-digit level due to hike of commodity prices in the local market and turmoil in the Middle East.
The overall point-to-point inflation has moved higher to 10.49 per cent in March compared to the same period of the previous year, according to the latest Consumer Price Index (CPI) report prepared by the Bangladesh Bureau of Statistics (BBS). The general food inflation in March 2011 increased to 13.87 per cent.  Earlier, the country experienced a double-digit inflation in July 2008, November and December in 1998, and July in 1995. According to the BBS data, the country-wide point-to-point food inflation rate in March this year reached 13.87 per cent while the non-food inflation was 4.32 per centage points.
Dr Mujeri, also the Director General of Bangladesh Institute of Development Studies (BIDS) said the major reason for inflationary pressure is more in the structural factors than in monetary factors.
The structural factors are supply bottlenecks, market imperfection, supply disruption, global price-hike of food and oil, and very high inflationary expectations.He said that the inflation is rising, especially the food inflation, and it has not cooled down.
Dr Mujeri observed that the current high food inflation may also impact on non-food inflation, which is currently little lower than food inflation.
He also cited strong domestic demand, high private sector credit growth, increased consumer spending and huge liquid money with the public as some of the reasons behind the inflationary pressure. He said: “There is now huge liquid money with the public - around Tk 10,000 crore - for various reasons.” The BIDS DG observed that the current inflation situation might affect the life standard of the commoners especially the poor and the middle-class, but that will be temporary. “The Boro yield is expected to be good this season and it will have an impact on price. If the production appears good, the market is also likely to be stable.”
He expressed doubts over the success of the steps taken by the central bank to control credit by increasing the cost of credit through increasing the rate of Repo and reverse Repo to rein inflation.
“The use of Repo and reverse Repo should be made more frequent and the Bangladesh Bank should be more pro-active so that the monetary policy becomes prudent,” he said.
Asked whether the inflationary situation may hinder the growth momentum, Dr Mujeri said that the pre-condition of growth is the macroeconomic stability.
“If inflation rises, the other balances including the external sector are disrupted and the poor are largely affected, which could also put a barrier on inclusive growth.”
He said the rising trend of inflation needs to be contained to retain the macroeconomic stability as well as the growth momentum.
According to the BBS, the inflation in the rural areas in March this year reached 11.33 per centage points with 4.84 per centage point food inflation and 4.39 per centage point non-food inflation.
The urban areas have experienced 8.40 per centage point inflation on point-to-point basis, with 11.66 per centage point food inflation, and 4.13 per centage point non-food inflation.
The economy of the country has experienced double-digit inflation of 10.8 per centage point in July 2008, 11.04 per centage point in November and 12.7 per centage point in December 1998, and 11.4 per centage point in July 1995.

News:The Independent/ Bangladesh/ May-03-2011