Curbing inflation: Rice price a major roadblock to govt measures

Rice prices remain a major driver of food and overall inflation in Bangladesh, calling for strict monitoring of domestic market and supply management, says the planning commission's General Economics Division.

In its August outlook released on Sunday, the GED says rice's contribution to food inflation rose from 40% in May to 51.55% in July with prices of all three major rice categories — fine, medium, and coarse — marking rise.

Most consumed medium and coarse varieties hit double-digit inflation since December last year, frustrating the expectations that the Boro yield would ease the price pressure on the staple since June.  

This comes in stark contrast with the global market trend as the staple's prices slumped to their lowest in eight years. Thailand's rice fell from $660 per tonne in January last year to $392 this July, while consumers in Bangladesh are paying Tk5-17 higher per kilogram, depending on varieties, now than a year ago.

This is happening despite larger stock in government warehouses and more imports than the previous year.    

The GED identifies production shortfalls as a key factor. Data from the Bangladesh Bureau of Statistics (BBS) show that Aus and Aman production dropped by 0.85% and 6.04% in FY2024–25, mainly due to frequent floods and unfavorable weather. Land under Aus cultivation also fell by 7.32% compared to the previous year.

To ease the supply crunch, the government announced a procurement target of 1.4 million metric tons of Boro rice in April. However, rice distribution in July was only 62,889 metric tons — 36% lower than the same period last year. The Ministry of Food also invited private imports on July 23, with a deadline for applications set for August 7. The GED cautions that these measures may take several months to impact market prices.

What drives rice prices high

Though Bangladesh almost meets its rice demand by domestic production, it still needs to import rice to meet contingency and stabilise supply.

But there was no import in FY24 and the government's food grain stock, which it builds from procurement from local production and also from import, drastically fell in November last year. Depleted stocks prompted millers to hike rice prices and the trend still continued, some analysts believe.

The import resumed and the government's food stock climbed to 19.7 lakh tonnes in July, three times the November stock. But prices did not fall.

"The next step will be to continuously monitor the domestic market situation and management, and provide necessary agricultural input at the proper time," the GED states in its outlook.

It suggests that the government should accelerate import and local procurement of food grain as well as scaling up OMS (open market sale) in the short run.

Food Secretary Md Masudul Hasan earlier said both OMS and food support programme would start this month. This year, 55 lakh families will get 30 kg of rice each month at Tk15 per kg for six months, he told The Business Standard last week.

Put together, harvests from two major crops- Boro and Aman—were higher compared to the last year and imports crossed 14 lakh tonnes so far this fiscal.

Then what is driving rice prices?

Agriculture economists suspect hoarding by a section of traders or millers as a reason for rice prices staying high.

"The government has the legal tools to act, but they are not used," Prof Jahangir Alam of Bangladesh Agricultural University told TBS earlier.

Inflation edges up after steady decline

Breaking a seven-month declining streak, headline inflation went slightly up to 8.55% in July from 8.48% in the previous month. "This should not be an issue of major concern," the GED says in its outlook, comparing with double-digit inflation when the interim government took office in August a year ago.

Coordinated fiscal and monetary policies, initiated by the interim government, have already pulled inflation down from double digits. Bangladesh Bank's latest monetary policy aims to reduce inflation below 7% by December 2025.

Non-food inflation stayed stable, and falling vegetable and root crop prices helped contain overall inflation in July.

Analysing the inflation data provided by the Bangladesh Bureau of Statistics (BBS), the GED outlook says the non-food inflation remained stable throughout the last fiscal year while contribution of vegetables and root crops, especially potato and onion, to food inflation significantly fell. But hilsa, pangas, brinjal, tomato and soybean oil were among the items that contributed to food inflation moderately to highly.      

It is the second consecutive month since February 2023 that general inflation dropped below 9% and food inflation below 8%, it says, acknowledging that supply-side issues still persists despite coordinated efforts from both the fiscal and monetary sides.