Rice biggest contributor to March food inflation: Report

Infographics: TBS

The soaring price of rice was the biggest contributor to food inflation in March, followed by fish, vegetables, and fruits, according to a report released today (7 May) by the General Economics Division (GED) of the Planning Commission.

The Monthly Economic Update Report – April 2025 noted that, among (broad) food items, rice contributed 34.14% to March's food inflation, followed by fish at 27.05%, vegetables at 14.20%, and fruits at 10.93%.

But when disaggregated by individual food items, the top contributors to food inflation were brinjal (17.12%), medium-quality rice (16.73%), coarse rice (12%), and hilsa (11.37%).

Rice prices surged, driven by Aman crop losses from flash floods in September–October in several districts and higher international market rates, the report stated. 

The rise in brinjal and hilsa prices was attributed to Ramadan and the Bengali New Year. However, the report stressed that the sharp increase in rice prices warrants urgent attention.

The GED report also highlighted that food accounted for the largest share (42.71%) of overall inflation in March, followed by housing (13.09%) and clothing and footwear (9.37%). 

The Bangladesh Bureau of Statistics had reported overall inflation at 9.35% in March, with food inflation at nearly 8.93% and non-food inflation at 9.70%. 

According to the report, overall inflation is relatively higher in rural areas, and so is the contribution of the above factors, highlighting the fact that more attention is required for efficient management of the food supply chain in rural areas.

While unveiling the GED at a press conference at the NEC conference room in the capital's Sher-e-Bangla Nagar, GED member Monzur Hossain said, "Inflation is currently one of the most pressing issues. There are very few analytical reports that examine why inflation occurs and how different products contribute to it."

He added, "In March, besides rice, the price of hilsa was also high due to increased demand during Pahela Baishakh, the Bengali New Year. This is a seasonal variation. Brinjal prices also rose due to Ramadan." This vegetable is used to make a popular iftar item called Beguni.

Monzur pointed out that people in rural areas mostly buy coarse rice, which is contributing the most to inflation. The Aman rice crop was disrupted due to flooding, and rice prices also increased in the international market—both factors drove up local prices.

Emphasising the need for both short-term and long-term government interventions to tackle inflation, he said the government must focus on increasing rice production and productivity.

The report stated that inflation is expected to ease in the coming months. A bumper Boro rice harvest is underway, and with new rice entering the market, inflation will likely decline. In May, inflation may drop to between 8% to 9%. 

BBS reported that general inflation eased to 9.17% in April from 9.35% in March.

Monzur Hossain further said, "We are seeing some signs of optimism regarding investment. Following the Investment Summit in April, we may begin to see positive impacts. Overall, we believe we are in a better position than before."

He further noted that due to low revenue collection, the economy is in a somewhat sluggish state. "Revenue mobilisation is weak, and if investment does not increase, revenue will decline further. While the government is borrowing from commercial banks, it is too early to say that private credit and investment have slowed down. However, high interest rates could reduce private credit flow," he said.

Monzur emphasised that the Bangladesh Bank should take measures to bring down the high interest rates. Even with a policy rate of 10%, the current lending rate (around 15%) could be brought down.

Bangladesh Bank did not approve the government's full borrowing target for the year, resulting in lower-than-planned bank loans. Without bank borrowing, the government may need to print money, risking inflation, he said. 

While such borrowing can strain the private sector, slow investment has left idle funds in banks, which the government is now tapping. The GED member stressed boosting revenue collection to lessen reliance on bank loans, Monzur said.

He added that discussions are ongoing regarding an IMF condition related to the exchange rate. Currently, Bangladesh follows a crawling peg system for exchange rate management, which is functioning well. 

"We don't believe the exchange rate should be left entirely to the market. The financial market lacks sufficient depth, and many banks are still weak. If the exchange rate is fully floated, it could become speculative and slip out of the central bank's control," Monzur added.