State of the Bangladesh Economy in FY2021-22
Independent Review of
RBD
Bangladesh's Development
3. External Factors Having Probable Impact on
Price Changes in the Commodity Market
☐ During the period under discussion, a number of external factors are likely to have contributed
to inflation in the domestic market. These factors include:
□ Rise in REER of BDT against US$: REER has posted a general rise over the recent past
indicating that BDT is overvalued, and exports were becoming less competitive.
The central bank has attempted to stall the depreciation of taka, however, taka has already
depreciated, thus, high global commodity prices have raised imported commodity prices.
Money led inflation due to diversion of subsidized credit in non-productive
activities: A higher level of broad money supply through disbursement of private sector credit
during the pandemic, was likely to contribute to inflation to some extent.
➤ Banks invested in the stock market during the uncertain period of the capital market in 2020
and 2021.
➤ Hence, the bubble created in the capital market would partly contribute by such investments
and other bank borrowers which may cause money inflation to some extent.
□ Upward adjustment of petroleum price in the domestic market: The MOPEMR has
increased the diesel price by 23 per cent from Tk.65 to Tk.80.
➤ Given the widespread use of petroleum in agricultural production, transportation and
milling of rice, the production and marketing costs of rice are likely to be pushed upward as a
consequence.
➤ Hence, cost-driven rise in harvest price of upcoming crops including Boro rice would further
create inflationary pressure in the coming months.
CPD (2021): State of the Bangladesh Economy in FY2021-22 (First Reading)
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