With the US Federal Reserve raising interest rates by 2.25 to 2.5 per cent within a rather short period of time, the value of dollar against other international currencies has also increased accordingly. British pound sterling is now at its lowest against US dollar in the last 37 years. So, one can easily understand the impact of a still stronger greenback on weaker economies and their currencies.
Evidently, Bangladesh is facing a far worse situation than Britain or the EU whose currencies are also accepted medium of exchange globally.
Since the US dollar gained its preeminence over gold as an international medium of exchange through the Bretton Woods Agreement of 1944, the practice of having this currency as reserve also grew over time in different countries of the world.
As the world economy has seen an unprecedented growth over the past three decades since the end of Cold War, the use of the US dollar as a reserve currency globally has also experienced a phenomenal rise. Now, the worth of an economy is judged by its dollar reserve.
Interestingly, with its increasing worth, the tendency to use the power of this currency as a political tool is also on the rise. Especially, economic sanctions applied by the advanced economies of the West to punish countries they think are not following in their footsteps provide ample instances to support this view. Economic sanctions generally boil down to depriving the victim nations of normal trade relations with the rest of the world using US dollar.
Small wonder that dollar is now the barometer of the world economy and any fluctuation of its value in the international foreign exchange is keenly monitored in every economy.
The current inflationary trend across the world has definitely a lot to do with pandemic-induced supply chain disruptions and the war in Ukraine. At the same time, a raft of sanctions imposed by the West on Russia have their domino effect on the international commodities market including fuel and food. With these two key drivers of the world economy under stress, their recessionary pressure on the world economy hardly needs explaining.
Now that the supply of dollar in the global forex market is squeezing, thanks to the US Federal Reserve's raising the interest rate, it has given a further push to the inflationary trend globally.
Consider the situation of Bangladesh economy. Since the beginning of the current year, the inflation has seen a persistently rising trend. In January, for example, it was below five per cent. But it jumped by more than one percentage point by the next month, February 2022. And the rise was unabated till June this year, when the inflation saw its highest rise at 7.6 per cent mark in the past nine years.
However, the situation here is far worse than what is reported in the official documents from time to time. For unlike in the advanced economies where the members of the public plan their monthly budgets depending on the Consumer Price Index (CPI) released by the official agencies concerned, that is hardly the case here in Bangladesh. It is not because the culture is yet to grow here. On the contrary, people here have little trust in printed figures as they do not match the realities of their day-to-day experience. Though the official figures on inflation are still in the single digit, the commodities market provides a quite different picture. So far, the price spiral was limited to the essential commodities like rice, flour, eggs, edible oil, etc. But recently, toiletry products, too, have joined the inflationary march.
Not unlike the rice millers, edible oil merchants or wholesalers of major essential items, the industries, the big commercial houses and even the multinational corporations have their cogent arguments such as increased raw material price, volatile energy price and, of course, the villain of the piece, the Russia-Ukraine war, to justify the price hike of their commodities. The result is businesses are making atrocious profit at the expense of the common people who are getting marginalised by the day.
Worse yet, the common people's level of earning has remained stagnant at the best and declined at worst. Many blue collar workers, especially, those employed in the export sector have often to accept reduced pays on the ground that their employers' profit earnings have fallen due to rising energy and raw material costs.
And being blue collar, they have at least the scope to block the city streets, bring the traffic to a standstill and make their complaining voices heard by their employers as well as the government.
But the white collar, fixed-income group, though they have the option to organise and lodge protest against any injustice, they hardly ever demonstrate their potential. And they are too meek to lift a finger to question the authorities as they are forever haunted by the fear of job loss. Those who depend on their daily earnings to eke out an existence have no organisation to look up to, nor have they any place to complain about their conditions.
So, it is hardly surprising that the syndicates of wholesalers, the millers, the big commercial and industrial houses are having a field day.
The inflation as a result has provided an excuse for them to make superprofit, get richer while the common people are being pushed to the wall.
So, in a country like Bangladesh, it is not simply a matter of policy options to control inflation or tame the volatile commodity prices. The market here is so manipulated by the vested quarters that the normal demand-supply law often fails to work.
So, in our case, the responsibility is greater for the government to step in from time to time to fix the commodities market and bring the errant business entities to justice in order to protect the common consumers.
