Transforming the global economy: a key role for the IFIs
As countries recovered from the trade war and pandemic-induced economic downturn, the Russian-Ukrainian war further exacerbated the already existing problem by disrupting the global supply chain and destabilizing production. As the economy is now more globalized and interconnected, the domino effect of these crises has caused global inflation and rising prices.
Like countries all over the world, Bangladesh is also facing the adverse effects of global inflation i.e. rising inflation rate, rising food prices, disruption in the supply chain of basis and declining foreign currency reserves. However, in comparison with other South Asian countries, Bangladesh remains one of the most stable economies in the region.
Rising global inflation and rising food prices
The current inflation and rising prices started in the US-China trade war in 2018, when commodity prices rose in the global market due to disruptions and delays. The situation worsened during the Covid-19 pandemic, with the inflation rate and prices reaching an all-time high since the 2008 financial crisis. In 2022, as the global market recovered from the Covid-19 pandemic, 19, the outbreak of the Russia-Ukraine war further impacted the global market by disrupting global logistics and supply chains.
While Ukraine shares 12% of total world food production and provides 17% of world corn, and Russia contributes 16% of food production and exports oil, gas, fertilizers, chemicals, Ukraine war contributes to the surge in inflation. The sanctions imposed by the United States on the Russian economy have also made it difficult for traders to maintain the natural mechanism of supply and demand, which in turn leads to higher prices for food, energy and commodities.
Countries around the world are therefore facing severe economic turbulence. The inflation rate in the United States reached 8.6% in May, which is higher than it has been since 1981. Other parts of the world, including Turkey, Argentina, Brazil, China and India, are also suffering due to higher inflation, increased food and daily staples. the price.
India, Asia’s third largest economy, also hit 7.8% inflation in April, the highest in 8 years. India’s economic growth has also slowed to an annual low in the first three months of 2022 due to weakening consumer demand amid soaring daily commodity prices. Between September 2021 and April 2022, consumer food price inflation in India also increased from 0.68% to 8.38% year-on-year.
Pakistan, another South Asian country, is also going through economic turmoil, including high inflation, reserves dwindling to less than two months of imports and a rapidly weakening currency. Its inflation climbed to 13.8% in May due to rising food and fuel prices. Pakistan’s consumer food price rate jumped to 17.3% in May 2022.
Impact on Bangladesh
As an importer of edible oil, foodstuffs, sugar, intermediate goods, fuel oil and raw materials for production, Bangladesh is also not immune to the negative impact of the world inflation, food and consumer price inflation. According to data released by the Bangladesh Bureau of Statistics, the inflation rate in Bangladesh rose to 7.42 percent last month from 4.87 percent a year earlier, while the food inflation rate declined. is accelerated to 8.3%. Bangladesh consumer prices rose 7.42% in May, the highest in 8 years.
Current increases in world food prices have led to a sharp rise in food prices in Bangladesh. Apart from food, as Bangladesh is also an energy importing country, rising oil, gas and fuel prices in the global market have already affected domestic prices. Thus, sectors such as transport and agriculture have been affected. Furthermore, due to the impending energy crisis, Bangladesh, like many other countries in South Asia, is also experiencing power cuts in response to the energy shortage.
However, according to the main finding of the KRF Center for Bangladesh and the Center for Bangladesh and Global Affairs (CBGA), while most of the countries in the developing world are suffering from market fluctuations and economic crisis, Bangladesh has shows resilience in terms of inflation. , food inflation, foreign exchange reserve.
In terms of food inflation, in South Asia, Bangladesh (8.84) has relatively stable food prices compared to three other countries, namely Sri Lanka (30.7), Pakistan (17.04) , India (8.38) and Nepal (8.83) in percentage.
Regarding foreign exchange reserves, Bangladesh is still in a good position compared to its neighboring countries despite the crisis of Covid-19 and Ukraine. India’s foreign exchange reserve has increased from $7.5 billion to $572 billion through July 2022. In the case of Pakistan, it has increased from $23.2 billion to $16.4 billion. dollars while the foreign exchange reserve of Bangladesh is reduced to $46.1 billion from $39.77 billion as of July 2022.
Although Bangladesh is still one of the stable economies in South Asia, the prolonged global inflation and rising food prices may adversely affect the people and economy of Bangladesh by increasing the gap between rich and poor, increasing the number of households falling below the poverty line. line, creating new economic pressure on the middle class, increasing the unemployment rate and threatening the viability of small businesses that have already suffered job and revenue losses during Covid-19. These economic pressures could also trigger social and political unrest among the population.
Therefore, it is time for Bangladesh to take appropriate and adequate measures to deal with inflation and rising prices by effectively monitoring local and global markets, diversifying import destinations and increasing exports by exploring new markets. As this is a global problem, the government, business people and the masses should work together to deal effectively with the crisis.