The Financial Express

Realpolitik importance of stabilising food inflation and 2019 election

| Updated: November 11, 2017 12:40:43

Realpolitik importance of stabilising food inflation and 2019 election

Enormous billboards around Dhaka and in parts of the country boast Bangladesh's achievements - such as economic growth, huge foreign currency reserve, rural-electrification, joining the nuclear energy family and adding two submarines to its naval arsenal. All these achievements fail to answer one puzzling problem - how in middle of all these achievements our country's calorie intake decreased significantly! Maybe, we as a nation collectively have adopted a healthy diet regimen and decided to eat less and exercise more. Unfortunately, that is not the reason, according to Bangladesh Government's Household Income and Expenditure Survey (HIES) 2016 - both urban and rural poor communities have been continually decreasing their food intake.

The real reason is that our mass population can't afford to eat their required diet. In the midst of all kinds of injustice, corruption, and political chaos the poor people of this country still find comfort in rice. If our country as a system can't deliver that simplest promise of rice, then we must revaluate our so-called achievements. Bangladesh has fared well in agricultural sector, between 1980 and 2000 the real wholesale price of one kilogram of rice fell from Taka 20 to Taka 11. Moreover, during that same period, the inclusion of farming technology, high-yield seeds, domestic availability of fertilizers resulted increased rice production from 2.0 tonnes to 3.4 tonnes per hectare. Considering such fundamental achievements, the erratic fluctuation of rice price is puzzling. 

Flood destroying crops, syndicate manipulating the market, rise in import price are not excuses we should take for granted. These are known variables for a country like Bangladesh, especially when our staple food for centuries is rice. Since 2005 basic food price has adopted a sickly pattern where the initial price increase follows a modest decrease, but the final price remains relatively higher from the initial level. This year begun with coarse rice price around Taka 34-36 per kilo; then due to flood-induced crop loss and market manipulation around July the price went up to almost Taka 58-60 per kilo, almost 66 per cent increase in price. Eventually the government took steps to help stabilise the price, but it did not go back to the previous level - now per kilo coarse rice is around Taka 46-48 which is almost 27 per cent higher than the initial price. If this continues then by next year end the price will stabilize at Taka 58-60 per kilo.

Flood-related destruction of crops and syndicates trying to take advantage of that supply-side pressure are yearly occurrences. Government should prioritize flood prevention measures to prevent crop loss and monitor market to regulate price manipulation of basic staples like rice, lentils and onions. Uncontrolled food price shocks hurt the poor communities most and our political leaders and policymakers should remember the grievance induced by hunger from their electorates, especially with the upcoming election in 2019.

In 2008-2009 global food price increase ended up creating huge political instability in Bangladesh.  As Bangladesh's financial and banking sector is not that much integrated with the global financial system hence the 2008 global financial crisis did not affect our finance and banking sector. However, the food price spike during that same time was identified by empirical research to have had serious implications on the poor communities of Bangladesh. Considering the above dynamics, it is prudent for the current administration to appease the masses. Private sector and syndicates might have economic leverages but on an election year mass sentiment takes precedence.

Rice traders and importers might debate that government intervention in a market economy is not healthy practice in the long-run. True, and a functioning market economy promises competitive price. However, the so-called "market economy" of Bangladesh in practice is a managed economy, promising predatory level profit for the traders. In such circumstances, monitoring the market and intervention to stabilize the pressure is a necessary step to ensure food security. An enforced monitoring and accounting system should be in place that provides up-to-date inventory information of grain/rice stock.  

Some of our policymakers and certain experts, state boldly that Bangladesh is not the same country as before when it was portrayed as a poverty-stricken country. True, we are not that country anymore - now we are a country where the aggregate economy "charismatically" hides the inequality of the system. Even such an imbalanced system needs to take measures to maintain its economic leverage. The cheap-wage based labour economy is built on the premise of availability of basic staple like rice, lentils and onions at affordable price.

Fraudulent and aggressive profit-making practice in mega infrastructure projects do not translate to immediate pressure on services and goods that affects the poor. However, spike in basic staple prices does affect the poor masses considerably as they spend most of their earning on food. If we do not prioritize stabilizing the food price inflation, then it will gradually affect our economic productivity because of mal-nutrition build-up. The workers in labour-intensive manufacturing sector, day labourers and farmers individually might not be considered important to traders and profiteers, but their aggregate economic output is important for the system. The beneficiaries of Bangladesh's managed economy should take initiative to prevent food price shocks to maintain the cycle of long-term economic benefit.

It is time that we start putting billboards with pictures of poor-hungry people to remind ourselves and our policymakers about our collective failures and not boast about our selective achievements.



The writer is Archer Fellow Lee Kuan Yew Scholar.

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