Govt at last springs into action
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disproportionately higher than that in the global market or found to have gone in the opposite direction in some cases, according to a study of the commerce ministry.
The study findings were presented at the meeting, which was attended by representatives of commodity traders, the revenue authority, the central bank, and the Chittagong Port Authority.
When asked about the price discrepancy, the representatives of the commodity traders blamed it on the depreciation of the taka against the dollar and the multiple exchange rate system that is currently in force.
“For you, the dollar rate is Tk 111, but for us, it is Tk 116,” said one of the representatives.
Yesterday, the interbank exchange rate stood at Tk 108.51 for a dollar, according to data from Bangladesh Bank.
Taka depreciated by about 18 percent in the past year, according to data from the central bank.
Subsequently, Ghosh asked the BB representative to take measures to arrest the discrepancy in the exchange rate for commodity importers, said meeting sources.
The commodity traders also tried to pass off the elevated prices on banks’ stipulation of 100 percent cash deposit for opening letters of credit for imports, but the BB representatives shot it down.
The requirement of a 100 percent cash deposit is just for luxury products; for food essentials, a token advance is sought, said central bank officials present at the meeting.
Still, Ghosh asked them to ensure smooth LC openings for commodity importers, according to meeting attendants.
He also asked the representatives of the Chittagong Port Authority to ensure quick unloading of commodities so that the importers do not have to count late fees.
Delays at the port cost the importers late fees, which they factor in their pricing, and also disrupt the supply chain, the traders said.
The representatives of commodity traders also blamed high duty.
For instance, sugar imports face duties ranging from 62 percent to 67 percent.
“This is too much. A Tk 42 duty on a kg of sugar is too high,” Ghosh said at the meeting.
For soybean and palm oil, there is an ad valorem duty of 15 percent. The tax incidence for garlic and ginger imports is 10 percent.
Ghosh asked the representatives of the National Board of Revenue to bring down the tax incidence for sugar and edible oil for the sake of reining in inflation.
Last week, the commerce ministry wrote to the NBR to bring down the duties; another letter was sent after yesterday’s meeting as a formal reminder.
Meanwhile, the government also wrote to India seeking to import 15 lakh tonnes of rice, 25 lakh tonnes of wheat, 10 lakh tonnes of sugar, 6 lakh tonnes of onion, 0.50 lakh tonnes of garlic and 1 lakh tonne of ginger on special consideration to meet the shortfall in Bangladesh, The Daily Star has learnt from officials informed of the proceedings.
The commerce ministry now will take all-out initiatives to negotiate with India.
In the letter, Bangladesh requested India to inform ahead of time should the latter plan to impose restrictions on the export of daily essentials.
The ministry also decided that ginger, price of which has increased by as much as four times in recent weeks, would be imported from Myanmar to bring down its prices.
All these initiatives are good and welcome, but their implementation would be tough, said Selim Raihan, a professor of Dhaka University’s economics department.
“Whether the initiatives would be successful in taming inflation remains in question.”
In May, inflation hit an 11-year-high of 9.94 percent, taking the average inflation in the first 11 months of the fiscal year to 8.95 percent, considerably overshooting the budgetary target of 5.6 percent.
Food inflation stood at 9.24 percent, while in urban areas it was 9.97 percent.
Raihan said, “Inflation has become intolerable. It has been this way in the past year. Why did the government let the inflation get to this stage? Why did the commerce ministry take these initiatives after instructions from the prime minister?”
If things continue this way, it may create social instability, said Raihan, also the executive director of the South Asian Network on Economic Modelling.
Subsequently, TCB must expand its family card programme to more than 1 crore families.
The commerce ministry must also look to diversify its import sources.
“However, prices will not come down automatically if the supply increases since there is market manipulation to consider. Market monitoring is imperative too. Tough measures are needed for these.”
And to bring down inflation, the central bank’s forthcoming monetary policy will have an important role as it can rein in the demand-side pressure.