Non-food items quicken inflation
Inflation rose 0.33 percentage points to 11.29 percent in August, compared to a month earlier, mainly due to a rise in prices of non-food items.Food inflation fell 0.77 percentage points, but non-food inflation went up 2.36 percentage points, according to data released by Bangladesh Bureau of Statistics yesterday.
A central bank high official said a rise in non-food inflation is caused by seasonal factors. On the eve of Eid-ul-Fitr, a huge number of financial transactions took place that contributed to the rise in inflation.
A BBS official said spiralling fuel prices, transport fares, clothing prices and household costs were reasons behind the rise in non-food inflation.
However, huge subsidies in the fuel and power sectors compelled the government to go for increased bank borrowing, which in turn pushed non-food inflation up, said a finance ministry official.
According to central bank statistics, the government borrowed Tk 5,224 crore from the banking system from July 1 to August 31. But at the same time last year, the government did not borrow money and rather, repaid an amount of Tk 598 crore.
Of the total amount borrowed, the government took Tk 2,866 crore from the central bank, which was fresh money having more inflationary effect than borrowing from the commercial banks.
The finance ministry and Bangladesh Bank held meetings with the prime minister on Tuesday on inflation and subsidy, expressing concerns at the rise in inflation.
The finance ministry official said every month they have to spend about Tk 1,200 crore to Tk 1,300 crore on account of fuel and electricity. In the meeting, the prime minister gave directives to minimise subsidies in a way so that it has little effect on inflation.
David Cowen, chief of the visiting IMF mission, yesterday told a press conference that inflation has also been on the rise pushed by higher food prices and demand-side pressures. However, he said the inflation rate is projected to come down modestly by the end of the fiscal year, mainly due to more moderate expected increases in global commodity prices.
According to BBS statistics, food inflation was 12.70 percent in August which was 13.40 percent in July and non-food inflation was 8.76 percent in August, up from 6.46 percent in July.
A BB high official said the bank has tightened the monetary policy that resulted in a slight fall in credit growth. In the coming days, non-food inflation will fall further, the official said.