The average cost of living in Dhaka is prohibitive

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Due to rising inflation, the cost of living is rising according to the latest calculations from the Center for Policy Dialogue (CPD). They found that the average cost of living with a “regular diet” and a one bedroom apartment (4 people) outside the city center is around Tk 42,548 and in the city center the cost is of Tk 47,182 per month.

CPD did the calculations for May of this year. In this case, these costs will increase further after June 5 because the price of gas has increased by 105 Tk.

The price of gas for unmetered double burner domestic users has risen to Tk 1,080 from the current Tk 975 per month. Previously, the weighted average price of gas per cubic meter was 9.8 Tk, and it is increasing to 11.56 Tk per cubic meter.

Analysis shared at the Center for Policy Dialogue (CPD) press briefing on “The State of Bangladesh’s Economy in FY21-22” shows that at least 29 imported essential food items are currently face a high tax incidence.

On the other hand, high inflation in Bangladesh has revealed the inherent weakness in the government’s approach to mobilizing domestic resources, which is largely dependent on raising revenue from indirect taxes, the Center for Policy Dialogue (CPD) said.

Dr. Fahmida Khatun, Executive Director of CPD, said in her presentation, “In addition to the high price of basic food items, the soaring prices of non-food items are placing a heavy burden on households. Crowd data shows that maintaining even a modest standard of living was becoming prohibitively expensive for households in Dhaka. »

“In the absence of government support, out-of-pocket health expenditure for a four-person household was equivalent to Tk 2,625 per month in 2019, at purchasing power parity. to fall below the poverty line due to out-of-pocket healthcare costs.”

Describing a possible calculation made by the CPD, she added: “The average cost of living on a ‘normal’ diet for a household of four living in a one-bedroom apartment outside Dhaka city center in May 2022 would be around 42 Tk .548. The average cost of living on a compromised diet for a household of four living in a one-bedroom apartment outside downtown Dhaka in May 2022 would be around Tk 29,206.

For families who live in the city center with a one-bedroom apartment and follow a regular diet, the cost of living per month is Tk 47,182, she added.

The government was recently forced to remove VAT on soybean oil in an effort to prevent the price from rising further. It is likely that if inflation continues at the current rate, the government may be forced to remove other indirect taxes on essential items as well.

“Thus, fiscal policy that relies heavily on indirect taxes propagates economic inequality in society and forces the government to sacrifice revenue generation in the face of high inflation.”

Inflation rose to 6.29% in April, its highest level in 18 months. It was 6.22% in March.

The CPD shows how high inflation directly threatens the food security of minimum wage workers.

“Therefore, there is an urgent need to immediately review and revise minimum wages for workers in all industries.”

The struggle of the poor and low-income group that began with the Covid-19 outbreak in early 2020 is now being compounded by the relentless rise in prices of basic necessities.

These people are still struggling with their limited budgets as pressure from price increases continues to mount. This affects the process of economic recovery as a large part of the population is still struggling to stay afloat.

“Although the current price increase is mainly due to the high cost of imports, domestic factors, such as market distortion by a few dominant players, are also responsible,” the CPD said.

CPD believes that any incentive structure is not permanent and this should be determined taking into account changing circumstances.

Speaking at a press conference, Professor Mustafizur Rahman, a distinguished CPD colleague, said: “Expats get a little extra benefit by raising the price of the dollar. Therefore, granting a cash incentive of 2.5% can be reconsidered investment, employment and productive sectors, but we believe there is no reason to encourage remittances at this time.”

“If market management and supply are assured, commodity prices can be kept stable. There are weaknesses in market management. For this, we need to pay more attention to market surveillance. At the same time, people’s purchasing power must be increased. It will ease the pressure on them,” Mustafizur Rahman added in response to a question.

Khondaker Golam Moazzem, Research Director of CPD, said, “Currently, the garment industry is growing at over 14%. This means that the state of this industry is quite good. In this context, there is no need for incentives in ready-to-wear. industry.”

In response to a question, Golam Moazzem said that now is the time to raise wages for garment workers. In response to another question, he said that it was not necessary to import fuel oil from Russia. We now need the government to pay more attention to gas supply.

The National Revenue Board (NBR) should immediately consider removing withholding income tax, withholding tax and statutory duties on all imported essential food items, he said.

“The role of the Bangladesh Competition Commission needs to be strengthened, especially in the case of the market for essential consumer goods.”

“The Commission should develop a database, regularly monitor the operations of dominant market players, examine market control and manipulation (if any) and take appropriate action.”

According to the CPD, following the trend of the first six months of FY22, it has now become clear that annual revenue mobilization targets will not be met.

If the current revenue mobilization trend continues, the revenue shortfall for FY22 is expected to be around Tk 30,000 crore.

Operating expenses due to grants and interest payments are expected to increase in the second half of FY22 and the upward trend is expected to continue in FY23.

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