Bangladesh faces risk of prolonged high inflation amid fiscal, energy challenges: Report

New Delhi, Sep 27 (IANS) Bangladesh’s inflation is increasingly emerging as one of the most challenging economic issues facing policymakers, with forecasts suggesting that price pressures are likely to remain elevated even as several neighbouring South Asian economies succeed in bringing inflation under control, a report has said.

According to projections by the Asian Development Bank (ADB) cited by The Business Standard, Bangladesh’s annual average inflation is expected to reach 8.7 per cent in the 2025-26 fiscal year and rise further to 9 per cent in 2026-27.

The forecasts indicate that inflation is no longer being driven solely by external factors such as volatile commodity prices, supply disruptions or higher import costs.

Economists believe that persistent inflation in Bangladesh is increasingly rooted in structural weaknesses within the economy. While food prices, exchange-rate depreciation and rising fuel costs continue to play a significant role, deeper issues such as inadequate competition, supply-chain inefficiencies, weak transport and storage infrastructure, excessive market concentration and delays in policy adjustments are keeping inflationary pressures elevated.

A key concern is the persistent imbalance in domestic markets, where prices tend to rise rapidly when costs increase but often fail to fall at the same pace when cost pressures ease, the report said.

Analysts say weak market oversight and insufficient competition policies have allowed this pattern to continue, making inflation more entrenched.

Experts argue that while tighter monetary policy and higher interest rates are important tools for controlling inflation, they are not sufficient on their own.

Monetary measures cannot fully address inefficiencies in product markets, distribution networks and supply systems that contribute to sustained price increases.

Fiscal policy is also emerging as a growing source of concern. Government spending commitments, including social protection programmes and public-sector salaries, continue to rise, while revenue mobilisation remains relatively weak.

The fiscal year 2026-27 budget projects a deficit of Tk2.26 lakh crore, with Tk1.25 lakh crore expected to be financed through domestic borrowing, the report noted.

–IANS

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