September 28, 2007	Friday	Ramazan 15, 1428

DHAKA, Sept 27: Bangladesh is to face stagflation soon, if the government fails to check inflationary pressure and erosion of business confidence, some noted economists of the country fear.

Economic stagnation, high inflation, post-flood management and regaining business confidence are the four major challenges that require prudent and immediate steps from the government, said the economists at the publication ceremony of Bangladesh Economic Outlook, prepared by Unnayan Shamunnay, a private sector think tank, on Thursday.The Outlook said slow growth in agriculture, rise in global food prices, sharp depreciation of taka against US dollar and Indian rupee, and rise in prices of diesel and kerosene are the main reasons behind the food price inflation.

In the Outlook, researchers showed that 21 per cent fuel price hike in April increased inflation by 1.1 per cent, bringing about 36,000 families below the poverty line.

Inflation for small traders, low-paid apparel workers, rickshaw pullers and day labourers went up by 21 per cent in August this year compared with August last year, the outlook showed.Selim Raihan, a Dhaka University teacher, in his presentation said import related inflation in the country is 2.3 per cent, which means if prices of rice, wheat and edible oil increase by 50 per cent in the international market, it adds 2.3 per cent to domestic consumer price index. “And due to this, about 100,000 families would fall below the poverty line”.

Akbar Ali Khan, former finance minister and a noted economist, said that economic growth would decline if inflation continues to increase, he cautioned. “The government should be careful about inflation”.

Khan suggested that the government should increase food grain import to keep the prices of essential stable. In 1998, when the country faced a devastating flood, the government had imported 6.2 million tons of food grain. “This year the government should import more as population increased in nine years”.

Notably, the country is facing a shortage of three million tons of food grains and the government should take immediate initiative to import food by itself or through private sector.

Mahbub Hossain, executive director of BRAC, said the country’s agriculture production is stagnant while demand continues to surge, pushing the prices up.

He pointed out that the import prices are facing double impacts — currency appreciation in exporting countries and taka depreciation at home.