Shakhawat Hossain

The point-to-point inflation soared to 11-year high of 11.21 per cent in November last eclipsing the previous 10.11 per cent mark recorded in August last, sources said.

The supply side constraints concerning essential products and the effects of the devastating cyclone Sidr were attributed to the inflation reaching the new high in the penultimate month of the last calendar year.

According to the provisional estimate of the Bangladesh Bureau of Statistics (BBS), the inflation caused by the supply side constraints was more acute in the rural areas than in urban areas.

Since July last the point-to-point inflation had been hovering above the double digit mark excepting in September when the inflation fell to 9.6 per cent.

Experts have pointed out that the wrong policy, the lack of proper market monitoring by the caretaker government (CG) and rise in food and fuel prices in the global market have been behind the high inflation that has already challenged the country's macro-economic stability.

Zaid Bakth, senior research fellow of the Bangladesh Institute of Development Studies (BIDS), said the CG failed to contain the inflationary pressure due to a series of mistakes.

The mistakes include the anti-hoarding drive conducted by the government early last year, which resulted in sluggish import business activities. The increase of import duty on raw and intermediate materials in the current fiscal budget has been another main mistake.

'Add to these, the substantial price hike of various goods in the international market, that compounded the entire situation,' he added.

Later, the CG encouraged the businesses to increase the import activities but failed to utilise the fiscal measures to establish a proper market monitoring system to contain inflation, he observed.

To overcome the inflationary pressure, the BIDS senior research fellow suggested that programmes like test relief, open market sale (OMS) of rice and other food-related activities should be increased and the budgetary allocation should also be raised.

He said the additional budgetary allocation should be met by cutting unnecessary projects under the Annual Development Programme (ADP) so that the budgetary discipline remains intact.

'Progress of many ADP projects is very poor and those will not contribute to the economy as per expectation. Omitting those projects will help the government solve the resource problem,' he opined.

Unlike other South Asian countries, the country is not only facing the high inflation but also the threat of an economic growth in the current fiscal which is lowest in recent years.

Although the central bank is expecting a 6.5 per cent growth, the International Monetary Fund's prediction is 5.5 per cent.

An expert said Sri Lanka, with the highest per capita income in the South Asian nations, was experiencing 16 per cent inflation in 2007.

But the estimated growth of the island nation was 6.7 per cent last year.

Inflation in Sri Lanka is demand-driven, but inflation in Bangladesh is influenced by the supply-side effect. The later one is the worst kind for any economy, he mentioned.