In the final month of the Awami League government, the nation witnessed a record surge in food inflation. In the first month (July) of the current fiscal year, food inflation soared above 14 percent, the highest since the 2010-11 fiscal year. Additionally, overall inflation also reached double digits last month.

For the past two years, inflation has been on an upward trajectory, with nearly every month setting new records. According to economists, the government’s failure to take appropriate measures was a key reason why inflation remained uncontrollable. As a result, the high inflation rate significantly contributed to the mass uprising that ultimately led to the downfall of the Sheikh Hasina government.

Yesterday, the Bangladesh Bureau of Statistics (BBS) released updated figures for the Consumer Price Index (CPI) and inflation for July. The data revealed that overall inflation in the first month of the 2024-25 fiscal year stood at 11.66 percent, which was 9.72 percent in the previous month. Meanwhile, food inflation reached 14.10 percent.

During the 2010-11 fiscal year, the average food inflation was 14.11 percent. By this measure, last month’s food inflation was the highest in nearly 15 years. Previously, the country’s general inflation stood at 12.3 percent during the caretaker government’s rule in the 2007-08 fiscal year. Then for the first time it again exceeded 11.5 percent.

Dr. Selim Raihan, Executive Director of the South Asian Network on Economic Modeling (SANEM), told Bonik Barta, “The government adopted flawed monetary and fiscal policies. They did not adjust interest rates for an extended period. They also took massive loans from the central bank, which fueled inflation.”

Dr. Raihan, a professor of economics at the University of Dhaka, added, “Even though the government made some policy changes later, they were ineffective. The government did not reduce tariffs on imported goods. When currency devaluation reached 30 percent, then tariffs could have been reduced. Furthermore, no action was taken against unscrupulous businesses that raised prices through syndicates using their political connections.”

When asked what measures the current government could take to control inflation, Dr. Raihan responded, “It is essential to restore law and order to ensure the smooth functioning of economic activities. The supply chain is still not fully operational. Additionally, action must be taken against dishonest business practices.”

According to BBS data, last month, general inflation in rural areas was 11.89 percent, compared to 11.27 percent in urban areas. However, food inflation was higher in urban areas than in rural areas, with rates of 14.06 percent in rural areas and 14.22 percent in urban areas.

Economists believe that the student-led protests in July disrupted the supply chain. This is a primary cause behind the record surge in inflation.

Dr. Mustafa K. Mujeri, Executive Director of the Institute for Inclusive Finance and Development (INM) and former Director General of Bangladesh Institute of Development Studies (BIDS), told Bonik Barta, “Inflation was already on the rise in the country. The students-led protests further disrupted the supply chain and communication systems. This exacerbated the inflation. However, the pressure may ease once the situation stabilizes.”

Dr. Mostafizur Rahman, Distinguished Fellow at the private research organization Center for Policy Dialogue (CPD), told Bonik Barta, “Inflation has remained in double digits for the past two years. This resulted in a decline in the standard of living. Although the government implemented some social protection programs, they were insufficient. The situation also frustrated the middle class. As a result, they came down the street together with the students.”

When asked why the previous government failed to control inflation despite neighboring countries’ success, Dr. Rahman stated, “There was no coordination between our monetary and fiscal policies, unlike in other countries. Weak market management and syndicates played a role. Interest rates were also fixed. A few importer groups had the opportunity to control the market. Additionally, the increase in gas, electricity, and fuel prices had a significant impact. The issue of non-performing loans also hampered new investment capacities.