Despite a notable 13.7% global decline in food prices in 2023, Bangladesh’s local market remains resilient, prompting questions about the factors influencing this resistance. The United Nations Food and Agriculture Organization (FAO) attributes the global price drop to reductions in baby food and meat prices, marking the lowest observed prices in three years. However, Bangladesh’s scenario paints a different picture.
While the wholesale market in Bangladesh sees minimal price changes, the impact is not reflected at the retail level. The prices of key commodities like edible oil and wheat, which have decreased globally, fail to translate into lower prices for consumers in Bangladesh. Several factors contribute to this phenomenon, prompting a closer look at the intricacies of the local market.
Traders in Bangladesh suggest that the current trend of food prices is unlikely to reverse soon, citing increased import costs amid a dollar crisis and the Red Sea conflict. Challenges in the form of high dollar prices, elevated freight charges, and complex letter of credit (LC) procedures contribute to the resistance of local prices to global trends.
Private importers point out that the cost of importing goods is impacted by the high dollar price, with traders paying Tk124 to purchase dollars for imports. Additionally, LCs cannot be initiated in the bank without paying 120% of the money in advance, further complicating the import process.
The Trading Corporation of Bangladesh (TCB) reported price increases in January for flour and edible oil. Unpackaged flour prices rose by 3.16%, while packaged flour increased by 4.35%. Refined or all-purpose unpackaged flour saw a 3.85% increase, with packaged variants rising by 3.57%.
Despite the global decrease in commodity prices, Bangladesh’s dependence on wheat imports and increased import costs due to geopolitical tensions contribute to sustained local prices. Wheat prices, influenced by factors like the Russia-Ukraine war and conflicts in the Middle East, have not seen a significant reduction locally.
Golam Mowla, president of the Moulvibazar Traders Association, highlights that Bangladesh is not benefiting from the international drop in dollar prices, and the impact may take time to manifest positively in the local market.
Economists, including Professor Mustafizur Rahman from the Centre for Policy Dialogue (CPD), express concerns about the stability of Bangladesh’s market amidst falling global commodity prices. Monitoring and market management are deemed essential, with calls for effective measures to navigate these challenges.
Dr. Zaid Bakht, researcher at Bangladesh Institute of Development Studies (BIDS) and chairman of Agrani Bank, notes that the impact of commodity price changes takes time to reflect in the international market. Traders, even with reduced international prices, maintain previous price levels until they exhaust existing stocks.
Golam Rahman, president of the Consumers Association of Bangladesh (CAB), emphasizes the role of tariffs in preventing food price reductions. He acknowledges that steps are being taken to address inflation, providing hope for gradual price decreases.
Biswajit Saha, director of City Group, highlights concerns about increased import costs over the past year due to the devaluation of the taka against the dollar. The required cash margin of 120-125% to open an LC, coupled with the Red Sea crisis affecting freight charges, further complicates the market dynamics.
In response to the challenges, the government is actively working to control commodity prices and address the dollar crisis. Prime Minister Sheikh Hasina has directed relevant ministers to take immediate steps to alleviate consumer pressure by stabilizing essential commodity prices. The monetary policy, unveiled by Bangladesh Bank, focuses on curbing inflation, indicating a comprehensive effort to navigate the complex economic landscape.
