Food inflation a threat to macro economic stability: Unnayan Anneshan

Food price inflation could threaten Bangladesh’s macro economic stability, said think tank group Unnayan Anneshan.
In an economic update for the first two months of the current year, it warned that rising food prices could push more people into the poverty trap.
It also warned that unless anti inflationary measures were taken to contain food inflation rising by 1.31 per cent a month, overall inflation could touch 10.71 per cent by the end of the current fiscal year.
In that event, it warned, food inflation could touch 12.84 per cent by the end of this fiscal.
The report said that a double digit inflation would pose a severe threat to macro-economic stability of the country.
Food inflation, said Unnayan Anneshan would cut down the real income of the poor, seriously erode their purchasing power and leave a profound impact on poverty and inequality.
It means, it said, those above the poverty line before the food price started to rise could go below it.
The economic think tank apprehends that the rise in global food grains price together with supply constrains could threaten Bangladesh’s macro-economic stability.
According to it a one per cent rise in global food price converts to 0.23 per cent rise in food price in Bangladesh on an average raising general inflation by 0.18 per cent.
The rise in food price created a range of macro-vulnerabilities in the country, it said in its economic review of the first two months of the year titled, ‘Bangladesh Economic Update: Food Prices and Inflation Trajectory.’
In the report the group sought to analyze the food prices and inflation trends.
It observed that prices of essential food items particularly, rice sky rocketed defying a bumper harvest of boro crop.
It pointed out that the wholesale prices of wheat and rice rose at higher rates than their retail prices in 2010.
From January to December 2010, the wholesale price of rice increased by 25 per cent on an average while the price of wheat rose by 16.67 per cent, it said.
It said that in 2010 the retail price of rice went up by 20 per cent and of wheat by 13.04 per cent.
The gap between wholesale and retail price of rice was five per cent of wheat it was 3.63 per cent.
It identified hoarding by wholesalers as the main contributing factor of the enormous gap between the wholesale and retail prices.
In other words, it said, the wholesalers dictated the retail price.
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