Food inflation eases in March, but non-food costs keep pressure on households: GED

Bangladesh's economy presented a mixed picture in March, with easing food prices offering some relief while persistent non-food inflation, a widening revenue shortfall, and slowing development spending continued to weigh on the overall outlook, according to a report by the government's General Economics Division (GED).

While a bumper rice harvest provided temporary relief to consumers, the report said the broader macroeconomic landscape remains fraught with external vulnerabilities and domestic inefficiencies.

The latest Economic Update and Outlook for April 2026, published by the GED of the planning ministry, said overall inflation moderated to 8.71% in March from 9.13% in February. The decline was largely due to a drop in food inflation to 8.24%.

The "hero" of the month was rice, which saw inflation turn negative at -2.20%. This was fuelled by the arrival of the Boro harvest, increased imports, and government open-market sales.

However, the relief was partly offset by double-digit spikes in other food items, including meat prices, which rose 15.11%, along with continued pressure from fish and vegetables.

In contrast, non-food inflation remained "sticky" at 9.09%. Analysts point to a "pass-through effect" where high energy costs and currency depreciation have permanently baked higher prices into housing, transport, and utilities, reports UNB.

While the gap between inflation (8.71%) and wage growth (8.09%) narrowed slightly in March, the reality for the average household remains grim, according to the report.

Real incomes continue to erode as wage increases fail to keep pace with the cumulative cost of living. Household purchasing power remains under severe strain, leaving the population vulnerable to any renewed external shocks, it said.

The banking sector showed signs of resilience with total deposits reaching Tk19,95,461.3 crore in February, an 11.28% year-on-year growth. However, the surge in public sector credit growth (29.61%) suggests the government is borrowing heavily from the banking system to fund its operations.

On the fiscal front, the National Board of Revenue continues to struggle. In March, the NBR collected Tk33,521 crore, missing its revised target by a staggering Tk19,769 crore (a 37.10% shortfall). VAT collection, usually a reliable pillar, saw the largest deficit, falling Tk11,527 crore short of expectations.

Development spending has also slowed. Implementation of the Annual Development Programme (ADP) declined during the July-March period, with total expenditure dropping to Tk75,607 crore from Tk82,894 crore a year earlier.

The decline was particularly pronounced in projects funded by foreign loans and grants, signalling procedural bottlenecks or shifting donor conditions. This slowdown in infrastructure spending threatens the long-term cyclical recovery of the economy.

The brightest spot in the March report is the surge in remittances, which hit $3.76 billion, up from $3.30 billion the previous year. This influx has helped stabilise foreign exchange reserves, which stood at $34.12 billion in March.

However, the export sector is flashing red. Year-on-year export growth plummeted to -18.07% in March, with RMG exports falling significantly. Rising global energy prices and domestic fuel hikes are making Bangladeshi goods less competitive on the world stage, the report said.

The exchange rate presented a mixed picture. While the taka remained relatively stable against the US dollar at 122.62, the real effective exchange rate (REER) rose to 126.03, indicating a real depreciation against a basket of currencies. While this may support exports in theory, it also raises the cost of imports.

The GED described the current easing in inflation as fragile, noting that the economy is relying heavily on two factors – the Boro harvest and remittance inflows.

With global commodity prices rising amid tensions in the Persian Gulf and a persistent shortfall in revenue collection, the report warned that the government faces a narrowing set of policy options in the months ahead.