Poor people will be more stressed
Since the start of the Covid-19 pandemic in early 2020, the poor people have been suffering a lot with life and livelihood due to lockdown, various restrictions, losing jobs and income, and hike in the prices of essentials due to disruptions in the supply chain.
Many poor families were forced to leave the capital and other big cities and move to the rural areas due to failure in managing foods.
Macro economy of Bangladesh faced various pressures in the last year prior to the full recovery from Covid-19 crisis, due to various issues related to the Russia-Ukraine war.
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Several macroeconomic indicators, especially the pressure on the foreign exchange, have come down to a tolerable level towards the end of the outgoing year thanks to several policy initiatives.
Inflation has eased slightly from a big jump in August. Even after that, prices of basic consumer products are not decreasing in the local market. Although macroeconomic pressures have eased somewhat, challenges remain.
The standard of the living for the poor people in the new year depends on the trend of inflation, initiatives of the government to combat inflation, especially allocation for the social security programmess and number of employment to be generated.
We have no major improvement in the government's revenue generation. Goods have to be imported at higher prices in 2023 too due to depreciation of the currency. The government's spending on imports of food, fertilizer, oil and energy is rising. Due to all these factors, the fiscal space of the government is decreasing.
Shrinking fiscal space may make it difficult for the government to increase allocation to expand programmes such as social security. In addition to increasing the allocation of these programmes, if the quality is not improved, there will be a major negative impact on poor people.
Trend of inflation has so far been unpredictable. It is not yet known which direction the exchange rate will go. There are suggestions to move away from multiple exchange rates and leave the rate to the market.
If this is done, the value of the taka will fall further and the inflationary pressure will increase. As a result, poor people will be more stressed.
The poor people suffer the most when the prices of goods increase. And in this situation, how poor people will live depends on what kind of initiatives are taken by the government.
The government has to find a way to tackle the inflation that is and will be happening due to the increased prices of imported goods. The latest hike of fuel price in the domestic market caused a big shock to poor people. The government should adjust fuel price downward following the international market.
In the meantime, increasing the price of electricity and gas has been in talks. If this is done, all the services will have to be purchased at a higher price, and the price of essentials will mark a further rise due to the increase in the production cost.
We know that the economy is moving in a contractionary phase and any increase in the cost of inputs will further reduce investment, production and employment. Apart from that, even if money supply is increased to stimulate investment, inflation will increase. In this situation, policymakers have to find a way to advance the economy in the future while creating employment.
Long-term employment generation is linked to electricity and gas prices, and increase in large-scale employment is difficult if energy problems are not addressed. The government should extend more policy support in small-scale informal sector to generate employment.
The wage growth remains below the inflation for the last couple of months, which indicates that the real income of wage earners is declining. The minimum wage declared for each sector should be revised upward to protect income for labourers.
Despite austerity measures in spending, the government needs to accelerate the projects to create temporary employment. Food support activities should be expanded in the urban areas, especially slums.
TBS senior correspondent Jahidul Islam talked with Dr Sayema Haque Bidisha
