Thirteen days after the assassination of Sheikh Mujibur Rahman on August 15, 1975, the headline in the national daily Dainik Bangla was, “Rice Prices Drop Nationwide”. The report, published on August 28, detailed a significant decrease in rice prices across the country. According to that report, rice was priced as low as BDT 2.15 per kg in Pabna and Joypurhat, while in the capital city Dhaka, prices had dropped by BDT 1 to 1.87 per kg over the previous nine days. In Sreemangal, rice prices had fallen to BDT 2.67 per kg, and in Netrokona, prices had decreased by BDT 1 to 4.28 per kg in the last 10 days. The falling rice prices had brought a sense of relief to the general public. Along with rice, the prices of other essential goods also began to decline. Dhaka’s rice traders believed that prices would drop further.

The August 15 regime change in 1975 led to a profound transformation in the country’s economy. Inflation was brought under control, and prices fell for food grains, clothing, and baby food, among other commodities. Corrupted traders went into hiding during this period. After the government led by Sheikh Mujib was overthrown with the highest recorded inflation rate in the country’s history at 67.17 percent, the following year saw inflation plummet to a negative 8.36 percent.

Meanwhile, the government led by Sheikh Hasina, which was overthrown on August 5. During her tenure, the nation saw the highest food inflation in nearly a decade and a half and experienced record inflation nearly every month in the last two years. Most recently, in July of this year, overall inflation stood at 11.66 percent and food inflation reached 14.10 percent.

Analysts point out that in the 1975-76 fiscal year, the cabinet led by Khondaker Mostaq Ahmed successfully controlled market syndicates and stabilized the supply chain. Public attention is now focused on what steps the interim government, led by Dr. Muhammad Yunus, will take to curb inflation.

Dr. Salehuddin Ahmed, the interim government’s advisor on finance and commerce, has highlighted inflation control as one of the government’s primary objectives. He expressed hope that inflation will soon be brought under control.

On August 15, 1975, following the assassination of Sheikh Mujib and his family, Khondaker Mostaq Ahmed assumed the presidency. Consequently, food prices began a steady decline that continued for an extended period. An analysis of reports from two national dailies over at least five months corroborates this trend.

A report in the Dainik Bangla on August 22, 1975, quoted the then-State Minister for Industry, Nurul Islam Chowdhury, as stating that production in both state-owned and private sector industries was satisfactory, and related corporations were operating normally.

The next day (August 23), newspapers reported that prices of rice and other essential goods were declining. The report noted that since the imposition of martial law, prices of rice and other essentials had dropped in various locations. This downward trend in prices had brought relief to consumers, especially those with low incomes.

The report cited that during that period, prices of medium-quality rice, which was previously BDT 4.66 per kg, was then selling at BDT 3.26. The price of wheat, which was BDT 4.20 per kg, had dropped to BDT 1.63.”

Not just essential goods, prices of other items also began to fall. The front page of Dainik Bangla on August 29, 1975, featured a report stating that prices of cloth and baby food had dropped along with other items. The report claimed that not only rice but also the prices of oil, soap, baby food, and cloth had started to decrease in the capital. Traders were hopefull that prices of essential goods would fall further. The main reason is that the so-called ‘Attaché Case Traders’, meaning unscrupulous traders, had completely disappeared during that period.

Quoting a trader from Moulvibazar, the largest wholesale market in the capital, the report said that since independence, those ‘Attaché Case Traders’ had exacerbated the shortage of goods. They had neither shops nor a business ethics. They had only influence, letterheads, and attaché cases. They managed to secure large quantities of goods through manipulation and hoarded them, which had intensified the shortage. They used to release goods into the market only when it suited them.

After Sheikh Hasina’s government came to power, the average food inflation in the 2010-11 fiscal year was 14.11 percent. In the last month, food inflation reached its highest level in nearly a decade and a half. Previously, during the caretaker government in the 2007-08 fiscal year, the country’s overall inflation was 12.3 percent. Last month (July) was the first time since then that inflation surpassed 11.5 percent.

Discussing the causes of high inflation, Dr. Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), told Bonik Barta, “The government adopted flawed monetary and fiscal policies. They didn’t adjust interest rates for a long time. They also borrowed large sums from the central bank, fueling inflation. Even though the government later made some policy changes, it was too late. They didn’t offer any tariff exemptions on imported goods. When the currency devalued by 30 percent, they could have provided tariff exemptions. Moreover, no action was taken against unscrupulous traders who increased prices through syndication. It was likely due to their political connections.”

When asked what steps the current government might take to control inflation, he said, “They must restore law and order to normalize economic activities. The supply chain is not yet fully operational. Additionally, action must be taken against unscrupulous traders.”

Before the regime change in 1975, the country experienced its highest inflation in history. According to BBS data, the average annual inflation rate in the 1974-75 fiscal year was 67.17 percent, while food inflation reached 76.89 percent. These levels were never seen before. However, the following year, overall inflation dropped to a negative 8.36 percent, while food inflation fell to a negative 15.99 percent.

However, analysts believe that the current situation is vastly different from the one in 1975. Zahid Hussain, former lead economist at the World Bank’s Dhaka office, told Bonik Barta, “The context of the two periods is entirely different. At that time, the country was facing famine, natural disasters, and poor relations with international organizations like the World Food Programme. These led to difficulties in food imports and aid. Back then, importing goods required licenses, which were often traded multiple times, causing prices to rise. The entire system was under government control, leading to widespread corruption. Therefore, the newly independent country’s situation back then is very different from today’s Bangladesh.”

Commenting on last July’s record inflation, the economist said, “The collapse of the supply chain is primarily responsible for the rise in inflation. The actual inflation data did not reach the Prime Minister’s Office, revealing the true picture. Previously, it was manipulated to show lower figures, even when it exceeded 10 percent. However, with the decline of extortion and syndication, inflation may ease now.”

Highlighting the potential for a decrease in inflation, Dr. Mustafizur Rahman, distinguished fellow at the private research organization Center for Policy Dialogue (CPD), told Bonik Barta, “Inflation might not drop as much as it did in the past. But food inflation could fall from 14 percent to around 8-10 percent. However, with prices remaining high, people’s purchasing power will continue to decline.”

To illustrate price levels, he said, “Take green chilies, for example. The price rose from 100 BDT to 300 BDT and then dropped to 200 BDT. In this case, inflation might turn negative, but prices would still be higher than before. At the same time, if incomes don’t rise simultaneously, purchasing power will remain constrained. Therefore, in addition to reducing inflation, there’s a need to increase social protection programs for the general population.”

Since the fall of Sheikh Hasina’s government, extortion on the streets and market syndication have significantly decreased. Market syndicates were previously identified as a major factor behind price increases. However, the current reality has seen these activities reduce considerably. Market analysts are now observing how long the government can maintain this situation.

Dr. Jahangir Alam, director of the Dhaka School of Economics and an agricultural economist, told Bonik Barta, “Sixty-six percent of the previous parliament’s members were businessmen. So it was natural for market syndicates to thrive. But that situation no longer exists. However, the question now is how well the government can control this.”

The agricultural economist believes that the current inflation is primarily driven by a shortage of goods in the market. He advised increasing agricultural production and ensuring the import of essential goods, saying, “The government has yet to take any visible new steps. Alongside contractionary fiscal and monetary policies, the government must create a favorable environment for increased production.”