Story 5: The Food Crisis in Bangladesh

Story 5: The Food Crisis in Bangladesh

Bangladesh, 28 November 2022 - 

Read our fifth story in the series on The Food Crisis: What's Happening, a collection of work on the current events and the impact communities are seeing on a global scale. The Food Crisis is affecting everyone socially, economically and nutritionally. GAIN Bangladesh discuss the wide reaching ripple effect the hardship in Bangladesh will cause on for those most vulnerable in society, and what actions need immediate attention. 

The world is going through crisis after crisis - the Ukraine war has been a major setback from the recovery initiatives to build back from the impacts of the COVID-19 pandemic which disrupted both global and local food supply chains, Food, raw material and energy prices have risen sharply, exacerbating potential vulnerabilities in the world’s food, health safety, and security system.  

In contrast to the impacts of the COVID-19 pandemic which were mainly characterised by disruptions to local markets as a result of restrictions on economic activity and mobility, the impacts of the war in Ukraine have primarily been transmitted through global food, fertiliser and energy markets. Ukraine is a major exporter of oilseeds, corn and wheat with Ukrainian exports comprising 10% of global wheat exports. Severe restrictions on Ukrainian exports have been exacerbated by the actions of other countries, for example the edible oil market being destabilised by other countries’ bans on exports of palm oil. Sanctions on Russia, a major food commodity and fertiliser exporter and on Belarus a significant supplier of potash to the world market, have also constrained supply.  

How is the Ukraine war affecting Bangladesh? 

While Bangladesh is historically reliant on rice for the majority of its calorie intake, wheat has been becoming a more significant food source, with wheat consumption trebling since 2000 and now comprising 7% of calories but with 80% imported. Russia and Ukraine have both been major exporters of wheat to Bangladesh. Although the country does not import vegetable oils from these countries, the war has contributed significantly by increasing price as a consequence of associated bans put in place in the earlier stages of the conflict by other palm oil and soybean oil exporting countries. These included Indonesia which supplies 80% of Bangladesh’s palm oil imports and Argentina’s imposition of an export ban on soybean oil.  

The disruptions to imports have resulted in significant increases in local prices of key staples. The FPMA3, which tracks local wholesale and retail prices of rice, oil, and wheat flour in Dhaka recorded a 9.14% increase in medium grain rice year-on-year to September 2022 (with an increase of 7.38% since March 2022), a 32.46% y-on-y increase in palm oil (8.5% increase since March) and a 61.6% y-o-y increase in wheat flour (40.69% increase since March) which has led FPMA to issue a price warning for wheat flour in Bangladesh, stating "Prices of wheat flour reached new record levels in September, supported by high transportation costs and a slowdown in imports."  

Annual increases in excess of 20% have also been observed in the prices of pulses, eggs onions and fresh vegetables 

Additionally, since Bangladesh is an agriculture dependent country, the costs of imported fertilisers including nitrogen, phosphate, potash can have a deep impact on domestic production, increasing the demand for rice imports. Bangladesh having to buy these supplies at higher cost puts pressure on monetary reserves and impacts the currency market. Product stockpiling is another growing concern for the Government.  

The status of the new poor and peoples’ purchasing power 

According to the World Bank, the COVID 19 pandemic is estimated to have created 62-71 million new poor in 2020 and 48-59 million new poor in 2021 in South Asia. However, the recovery has been significantly better in Bangladesh than in other countries, (see Figure 1 for average LMIC GDP growth forecasts) Bangladesh’s growth forecast at 6.4% for the fiscal year 2021-22, rising to 6.7% in FY 2022-236. According to the Bangladesh Bureau of Statistics (BBS) data, there is a 9% increase in the per capita income in Bangladesh in 2021-22.  

Figure 1 – Food, fuel, fertilizer prices VS GDP growth 

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Source -–-taking-these-three-steps-could-help-most-vulnerable 

However, an increase in the inflation rate, as well as the increase in the energy prices in the international market, has impacted people’s purchasing power. Food inflation reached 9.08% in September 2022 after hitting 9.94% in August 2022, the highest since the fiscal year 2012-13, according to BBS data. 

A studies by the International Food Policy Research Institute (IFPRI)7 indicates that the percentage of rural households facing moderate or severe food insecurity increased from 15% in early 2020 to 45% in January 2021. At the end of 2021, it is estimated to have returned to the pre-pandemic levels.  

The price increase of food commodities, including oil and gas has put pressure on the low- and middle-income consumers, and is badly impacting their purchasing power and affecting consumption behaviour. Combined with food distribution and supply chain disturbances which can result in the lack of availability and affordability of diverse food and affect the dietary diversity scenario, this might result in a significant increase in food insecurity among the population. 

Further, there are concerns that low-income consumers’ purchasing power could be further eroded if exports of major employers such as the garment industry are disrupted by global events. 64% of the country’s garment exports, and 58% of the total exports are intended for the European market. 

 Natural disasters, food production, and food markets in Bangladesh 

While global disruptions have clearly impacted food availability and affordability, Bangladesh is also particularly vulnerable to the impacts of natural disasters, 

In Bangladesh, an estimated 7.2 million people in total were severely affected by the devastating flash floods in May and July 2022. This flash floods especially in the haor areas in Bangladesh submerged more than 80% area as per the United Nations flood situation report on Bangladesh. It damaged the production of paddy rice during the season and the excessive rainfall across the country damaged the ripened crop. In June 2022 Bangladesh’s Ministry of Agriculture (MoA) gave an updated crop loss assessment, which shows that Aus paddy (one type of highly produced seasonal paddy) on 56,000 hectares of land has been damaged. This is over 5% of the total Aus acreage (1.1 million hectares) in Bangladesh so far. This had an impact on the price of rice in the wholesale markets of different districts of Bangladesh from May 2022 as competition among traders to purchase more paddy due to concerns with less production intensified. 

The way forward – more focus on sustainability and resilience building 

The global leaders at the World Economic Forum in Davos 2022 stressed the importance of focusing on resilience building in terms of health, food, education, and social protection. 

A number of policy imperatives can be identified in this respect:  

  • Encourage proper functioning and more bargaining power in the international commodity markets of relevance to Bangladesh.  

  • Increase surveillance in the markets. According to experts, detailed and inclusive regulations and their implications are required to have good control over these. 

  • Ensure adequate supplies of safe and nutritious food in the market and reasonable prices for low-income consumers to stabilise the purchasing power and maintain their consumption. Supply chains need to be fully operational, including capacity for seeding, protecting standing crops, rearing livestock, infrastructure for processing food, and all logistical systems. 

  • Stimulus packages for the small and medium enterprises (SMEs) agribusinesses need to be supported to ensure continued food production and supply in the market. Also, the availability of fertilisers in import-dependent settings with the focus on the inputs of smallholder food producers. 

  • Decrease or control over the government expenses, control investment on less relevant and mega projects, proper usage of foreign currency expenses, and managing the inflationary pressures are suggested for long-term sustainability plans. Dr Syed Mainul Ahsan, Professor Emeritus at Concordia University, in an interview with The Business Standard, answered a question regarding policy recommendations for Bangladesh to improve per capita GDP in terms of purchasing power parity (PPP) – “For starters, the real growth rate must be increased. To do so, I would recommend macroeconomic stability and inflation management.” This is necessary to establish viable, well-financed mechanisms to support governments of the countries who are highly impacted by the crisis of COVID-19 and Ukraine war. 

The government and private sectors together need to have precautionary measures in place to tackle any further emergencies as well as a robust recovery plan to cope with shocks. During any crisis, the vulnerable become more vulnerable to the scarcity of basic needs including food safety and food security. A viable economy, availability, affordability of the essentials, and a stable food system that delivers for the unserved and underserved can help us to overcome food crises.