Fighting inflation
Photo: Munir Uz Zaman / Driknews
I have been observing Bangladesh from away, which gives some advantage of seeing the big picture. I am an economist. I think in this inflationary condition, the policy should be geared towards changing people's expectations. People in Bangladesh have formed inflationary expectations, which needs to be changed. At the moment, people are expecting prices to rise, which is feeding into the price level itself, making inflation a self-fulfilling prophecy. To change such inflationary expectations, the following two steps may be primary: Step1: Trade has to be encouraged to enhance domestic competition, especially in the food sector. Once the daily necessities such as rice and others are imported on a larger scale, it would drive down price of daily necessities due to competition. This is the benefit of trade. How? Watch for the foreign exchange market, encourage people, give positive signals to foreigners and domestic entrepreneurs. Step 2: There is evidence that market players are colluding to raise prices, as often seen after budget announcements, Ramadan etc. Credible market watch groups should oversee if there is monopolistic behaviour observed in a market (such as agriculture) which is supposed to work in line with perfect competition. Competition in the market can drive down the prices and generate overall efficiency. Let's work for that.
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