The interim government has managed to reduce inflation in the first month of its tenure. In the pivotal month of August, the most significant factor behind the overall inflation reduction has been the decrease in food inflation, which has dropped by nearly 3 percentage point from the previous month to 11.36 percent. Food inflation was at 14.10 percent in July, the highest in the past 13 years. According to the Bangladesh Bureau of Statistics (BBS), the current government has managed to control inflation in less than 25 days of taking office. However, despite this, the prices of almost all daily necessities, including rice and eggs, have increased rather than decreased. Analysts have therefore raised questions about the BBS's statistics.

The Bangladesh Bureau of Statistics (BBS) released the monthly Consumer Price Index (CPI) report on Sunday (September 8). The updated report shows that in August, overall inflation decreased to 10.49 percent, down from 11.66 percent in July. Food inflation fell by 2.74 percent to 11.36 percent, compared to 14.1 percent the previous month. However, despite the decrease in both general and food inflation, the inflation rate for non-food items has slightly increased, rising from 9.68 percent in July to 9.74 percent. During this period, inflation rates were higher in rural areas compared to urban areas.

Analysts, however, argue that despite the decrease in inflation rates, product prices have not fallen. Inflation is still in double digits. To bring it down to a negative level, market extortion and manipulation need to be controlled. Additionally, they point out that the Bangladesh Bureau of Statistics (BBS) has systemic issues in showing a decrease in food inflation, even though daily commodity prices have not decreased. Changes in the food basket could also impact the reported inflation reduction. Analysts suggest that the government should address these statistical weaknesses and consider reforms in the agency responsible for this data.

Mustafa K Mujeri, former Director General of the Bangladesh Institute of Development Studies (BIDS) and former Chief Economist of the Bangladesh Bank told Bonik Barta, "Systemic issues can create biases in statistics. For example, we might be taking the lowest average rates for various products. Changes in the food basket can also influence the reported inflation rate. We are still unable to accurately determine inflation. The weaknesses in the statistics need to be addressed. The sooner these issues are resolved, the better it will be for the reform process, and the statistics will be more realistic. However, it is not possible to conclude that inflation is decreasing based on just one month’s data; we need to observe for a few more months."

Inflation is determined by calculating the rate of price increase for each product and service according to its weight or importance. According to the inflation heatmap published by the Bangladesh Bank, grains have a weight of over 21 percent in the inflation calculation. Among these, rice weighs 20.31 percent, while eggs weigh nearly 5 percent. Additionally, fish has a weight of nearly 7 percent and spices account for over 4 percent. In August, the prices of these items did not decrease; instead, the prices of many daily necessities, including rice and eggs, increased. Only the prices of vegetables saw a slight decrease, though vegetables only account for 4.78 percent in the inflation calculation.

According to data from the Trading Corporation of Bangladesh (TCB), the price of coarse rice was BDT 52-55 per kilogram on August 31, compared to BDT 50-54 per kilogram at the beginning of the month. Similarly, the prices of medium and fine rice also increased by BDT 2-3 kilograms. Farm chicken eggs, which were selling for BDT 48-52 per dozen at the start of the month, rose to BDT 50-53 per dozen by the end of the month. During the same period, the price of Rohu fish increased from BDT 300-400 to 350-400. Traders attributed the price increases primarily to supply shortages and flooding, while market analysts and retailers blamed the manipulation by rice wholesalers. However, due to the absence of extortion on the roads at that time, the prices of all types of vegetables had decreased slightly.

According to government data, approximately 17.4 million tons of rice were produced during the last Aman season, which is higher than any previous year. Additionally, a record amount of rice was produced during the last Boro season. The production target was 2 crore 22 lakh tons, but 2 crore 24 lakh tons were produced.

According to the Food Ministry, the food stock as of September 5 was 1.97 million tons, including 1.46 million tons of rice. About a month earlier, on August 7, the rice stock was 1.29 million tons, indicating an increase of more than 1.5 million tons. Despite the increase in stock, the retail price of rice has been rising.

Despite the record production, agricultural economist Dr. Jahangir Alam told Bonik Barta, "A minimum stock of 1.2 million tons of rice is required. By this measure, our current stock is sufficient. The increase in stock is due to higher production during the last Aman and Boro seasons. There is no shortage of rice this time. There are adequate stocks at both the private sector and farmer levels. Importing rice might not be necessary. Therefore, there is no reason for prices to rise. Although traders cite flooding as the reason for the price increase, they are essentially attempting to manipulate the market as before."

According to Zahid Hossain, former Chief Economist at the World Bank's Dhaka office, the disruption in supply chains due to the July curfew and protests is one of the reasons why the prices of daily necessities have not decreased. He told Bonik Barta, "The trend of price increases for daily goods has slowed down, but it has not yet become affordable for people. Inflation needs to be reduced to a negative level. To achieve this, extortion and market manipulation must be stopped. If the prices of daily necessities continue to rise, people's discomfort will not ease."

For the past two years, there has been an upward trend in the country's overall inflation. In July, the Awami League government was ousted with the highest inflation in 15 years. However, the Sheikh Hasina government used interest rate hikes as a primary tool to control inflation in its final period. This approach did not succeed and instead led to further increases in inflation. The current government also considers controlling inflation as a key objective. Therefore, interest rates have been increased once again. However, stakeholders do not see any significant measures in market management.

In response to the question of how food inflation decreased so significantly in just one month despite the rise in rice prices, BBS Director General Mohammad Mizanur Rahman told Bonik Barta, "If rice prices had decreased, inflation would have reduced even further. The inflation did not fall much due to this. Also, inflation spiked in July due to disruptions in the supply chain. However, with the supply chain returning to normal in August, inflation has decreased."

After taking office, several government advisors and the Governor of the Bangladesh Bank presented controlling inflation as one of their main objectives. Efforts to contact the Finance and Planning Advisor for more information on the overall situation were unsuccessful, and their statements could not be obtained immediately.

Professor Dr. MM Akash of the Economics Department at Dhaka University told Bonik Barta, "In the short term, changes in product prices do not indicate trends in inflation reduction or increase. If the price of rice has increased, then has inflation been calculated based on a reduced weight (importance) for this product? If so, it would be a form of manipulation."