Bangladesh inflation rises on oil prices

Bangladesh's annual inflation rose to 11.58 percent in November from 11.42 percent a month earlier after the government, saddled with a huge subsidy bill for rising oil prices, raised fuel charges for the third time since May. Price pressures are a major concern for the government as more than a third of the country's 160 million people live on wages of less than $1.25 a day.
The annual inflation rate had slowed in October from 11.97 percent in September, the first fall since June. "Inflation went up again in November mainly due to a rise in oil prices," Shahjahan Ali Mollah, director general of Bureau of Statistics, told reporters after announcing the latest data.
Persistent inflation prompted the central bank to raise its key interest rates by half a percentage point in September, its fourth hike since March, following an earlier reserve increase and a 1 percentage point rise in official rates in August 2010. In addition to raising fuel prices, the government plans to raise heavily subsidised electricity tariffs for general consumers in a move that will push inflation higher still.
Inflation may keep climbing, as the government expects its subsidies for the year to June 2012 to leap to about 460 billion taka ($6 billion) or 5 percent of gross domestic product. That is more than double the original government estimate of 200 billion taka and well up from 195 billion taka last fiscal year. Food inflation edged down to 12.47 percent in November from 12.82 percent in October, while non-food inflation accelerated to 10.16 percent from 9.05 percent, the Bureau of Statistics said on Monday.
Inflation in urban areas rose even faster than the national average, hitting 12.11 percent in November on a 14.04 percent surge in food prices and 9.47 percent advance in non-food prices. Inflation in rural areas hit 11.37 percent, with an 11.80 percent rise in food prices and a 10.46 percent rise in non-food prices. Food prices have rocketed in recent months - despite record crops and ample stock at government inventories - with analysts blaming inefficient markets and hoarding.
The government's borrowing from the banking system has exceeded its target for the fiscal year from July in less than five months, which analysts fear will dampen economic activity and jeopardise the growth target of 6.7 percent this fiscal year. Inflation in the 2010/11 fiscal year that ended in June hit 8.80 percent, exceeding its revised target of 8.5 percent on the back of surging food prices.
The government aims to keep inflation within 7.50 percent as targeted for the current fiscal year. The country's foreign exchange reserves have come under pressure from soaring import prices, mainly for oil, slipping to the lowest level since August 2009. The local currency taka, which fell more than 9 percent against dollar over the past 12 months, continues to slide, further fuelling import costs and inflation.