BANGLADESH – Update: June 01, 2008
Current Political Events:
Long awaited dialogue between political parties and the present caretaker government have just started on 22nd May with the small parties and uncertainty still exists regarding dialogue with two major political parties (AL & BNP). It remains to be seen how the Caretaker Govt. handle this situation.
Public Reaction to date:
By & large the general public is very much confused over the political uncertainty and also the National Election which is supposed to be held on December 2008. With the prices of essentials, especially of food stuff, hunger is yawning in many households; corruption is grinning at the vaunted drive against ...view middle of the document...
The Government's administrative actions, such as anti-hoarding measures were counterproductive and failed to arrest upward trends in prices. The domestic cost of rice production has increased even with subsidized agriculture inputs such as diesel and urea fertilizer.
The immediate effect of rising food prices is on inflation, fiscal outlays, and external balance. Fiscal outlays to subsidize food consumption heighten budgetary pressures. Pressures also mount for upward adjustment of money wages. Monetization of the fiscal costs with accelerating wage increases may trigger further inflation. Failure to contain inflation could seriously undermine macroeconomic and political stability of the country.
The fiscal implications of subsidies on food and related inputs into food production, such as, fertilizer and fuel for irrigation, amplified by recent price rises, are sizeable. The Government's selling price under open market sale was Tk25/kg as against the import cost of Tk30/kg. Food subsidies, including inputs of production, such as, diesel and fertilizer are estimated at $1.3 billion or 1.7% of GDP in FY2008. The fiscal deficit in FY2008 is likely to rise to 4.8% of GDP from 3.2% of...