New Delhi, Sep 25 (IANS) Bangladesh’s persistent high inflation reflects deeper structural weaknesses in the economy and faulty policymaking, rather than just volatility in global markets or temporary supply shortages, a new report has said.
The report from Bangladesh-based The Business Standard said that persistent inflation is also driven by weak competition, supply‑chain bottlenecks, inadequate transport and storage, excessive market concentration and delayed macroeconomic adjustments.
Citing the Asian Development Bank’s September forecast, the report noted annual average inflation could reach 8.7 per cent in fiscal 2025–26 and 9 per cent in 2026–27. Food prices, exchange‑rate depreciation and higher imported fuel costs are also important drivers of Bangladesh’s inflation.
The report noted a recurring asymmetry in markets wherein prices rise quickly when costs increase but do not fall at the same pace when cost pressures ease. Weak market monitoring and ineffective competition policy create such a phenomenon, the publication argued.
A tighter monetary policy could help the situation to a small extent, but the government’s spending commitments on social protection, public-sector salaries create additional risks.
Revenue mobilisation remains structurally weak as the budget for 2026–27 projects a deficit of Tk2.26 lakh crore, including plans to finance Tk1.25 lakh crore from domestic sources.
The government becomes increasingly dependent on borrowing if expenditure continues to grow faster than sustainable revenue.
“Higher government borrowing can put pressure on domestic liquidity and raise the cost of financing. If deficit financing becomes excessively accommodative, it can also intensify inflationary pressures,” the report noted.
The publication called for a credible medium-term plan that links new spending commitments with sustainable sources of revenue.
The report urged “serious discussion about inefficiencies in the energy sector, the mechanism for setting prices, the tax burden on petroleum products and the financial weaknesses of the institutions involved.”
Private investment remains weak, as businesses remain concerned about policy uncertainty, regulatory complications, energy shortages and institutional weaknesses.
—IANS
aar/na