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Gone Money Gone

Inflationary pressures leave wallets empty

With the Ramadan lurking around the corner, the market- as the saying goes- is "on fire". The inflationary pressures have been high already, with prices of essential commodities like rice, vegetable and meat sky-rocketing. The pressure on the public's wallet has come to an all-time high point. At this stage, rising retail prices- particularly with the festivities offering a better excuse for yet sharper price hikes- are hitting us full swing, and coping with the galloping prices is becoming increasingly difficult.

Once we go behind the scenes, there are several points to note. The most prominent of these is the hitch in fuel prices in the global market. Being an integral ingredient for almost all economic activity, cuts in supply have led to rapid rise in prices. A large percentage of a person's income now goes to buying petrol or octane for his private car, particularly with octane costing Tk 90 per litre. More significantly, this equally applies to commercial locomotives such as lorries and heavy-duty trucks, used to transport raw materials and finished products. Faced with the rising oil prices, producers are faced with higher manufacturing costs, which are being passed on to the consumers in terms of higher retail prices.

Many have seen CNG conversion as a pragmatic alternative, but while this does go some way to tame the pressure, the effect is two-fold: first, vehicles converted to CNG have to end up taking oil anyways for engine lubrication, and second, the price of CNG gas has also doubled recently.

Supply of rice has also been restricted by rice producing countries like Vietnam and India- yet another reason for the price of this staple to shoot up. This has been compounded with bad harvest for certain crops, while reaping bumper production of others like potatoes. Inefficiency in the crop management and the buffer stock system has led to much of the excess produce to go bad while the prices have remained high in the market.

The combined outcome of all these have been a downfall in people's purchasing power, so that the same amount of money brings lesser volume of goods and services. As the real disposable income falls, what economists call a "multiplier effect" sets in. In simple terms, it means that if one person experiences a fall in income, he will buy less of other commodities, thus lowering the income of those engaged in their production. This creates a cycle, like falling blocks of dominoes, pulling down the income of everyone in the economy.

Consumers's response:
Given the turmoil in the market, one would assume that people would cut back on their expenditures and start planning wise. But, in practice, this has not been the case. People prefer not to compromise with the standard of living they are used to. They are buying the same number of gifts for the same number of relatives for this Eid. Interestingly, one could also ask: how many families have reduced the number of halwas they have made for this Shab-e-Barat? Lina (real name undisclosed), a housewife, responded: "It is never as easy as it sounds. What will the neighbours think if I make fewer halwa items? It will give off the impression that I cannot afford to do so. There is always this social stigma to cater to". As for Eid gifts, we received some similar answers. Salma, a newly married woman, said: "Cutting back is not really an option. My in-laws, for instance, are always giving me expensive saris from high-end boutiques, and it would naturally be cheapskate of me to give them something cheap like khadi, no matter how attractive the item may be." True, there are many subtle pressures that have become ingrained in the social infrastructure. Rawshan, married now for eleven years, said: "There are relatives from my husband's village that we have to give clothes and money to. It is expected of us, particularly given that he is the eldest son of the family."

For the lady of the house, budgeting for the season becomes a difficult task. In most families, not all the members fast. So, there needs to be preparations for at least five meals (breakfast, lunch, iftar, dinner and seheri). Even at a single meal, there is a need for careful planning. "Not everyone in my home likes the same food," said Rashida Khanam, a working parent, "The children, for instance, do not like fish, so I need to make provisions for chicken. Previously four chickens would cost Tk 400, but now with Tk 1000, it's a stretch. Plus, one chicken cannot last over two meals, so I have to end up spending on at least thirty chickens per month!"

Eid further calls for the provision of bonuses for the working class, starting from the fish vendors to the former maids dropping by for new clothes. Plus, many mid- and low-tier employees have responded to the "price crunch" by demanding salary rises, which of course is natural. But for those who are self-employed or are engaged in upper-tier employment, salary has not increased proportionally. So the pressure has been- paradoxically- higher for them.

In response, with their backs to the wall, consumers are running down their savings instead of lowering consumption. The savings, which could have provided a safety net for the long run, is being sacrificed for short run goals. Do we really need to make those extra halwa dishes? Or buy saris for those who already have closets full of them? Think of the trade-offs when we touch the money previously reserved for our children's education, our emergency medical funds or pension funds? Are we really ready to make the compromise?

Budgeting is no doubt difficult. And it is not for us, even as journalists, to dictate how you spend your earnings. We tried to point out the various obstacles to smart budgeting, but it is for you to decide on which factors matter to you the most. While the cliche- "money flies"- could not have been more apt, a thoughtful budget goes a long way.

By Shahmuddin Ahmed Siddiky
Photo: Sazzad Ibne Sayed


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