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What is inflation?

   Even if people's income does not increase, the price of goods continues to increase. Inflation is one of the reasons for not being able to cope with the rise in commodity prices. Inflation and rising commodity prices are closely related to several aspects of the economy. One of them is bad debt. If the price of goods or services increases by a certain amount over a period of time, it is called inflation in the language of economics.


Generally, the purchasing power of people decreases as a result of inflation. As a result, if the price of a product was one hundred rupees before. Then after inflation its price will be one hundred and ten rupees. Or for a hundred rupees, that product will be available in much less quantity than before. This also reduces the real exchange value of goods in the economy. To put it more simply, the value of the total wealth of the country is equal to the current total currency value or total rupees of that country.


 Think there is a total of one hundred rupees in Bangladesh. And the total wealth of the country is ten mangoes. Since the value of the total assets of the country is equal to the total value. So these ten mangoes are worth one hundred rupees. That means each mango is worth ten rupees. Now if fifty more rupees are printed. The total currency value will be one hundred and fifty or one and a half hundred rupees. But there are only the previous ten. But the money grew. Now after fifty rupees were printed, the total value of ten mangoes became one and a half hundred rupees. The current price of each mango is fifteen rupees. Which was ten rupees earlier. As a result of printing additional money without increasing the wealth, the price of mangoes went from 10 taka to 15 taka. This is inflation in simple words. Inflation means buying the same product at a higher price than before. Although there are many reasons behind inflation, it can be said in simple words, if money is printed without increasing the amount of resources of the country, inflation occurs. Many economic factors are involved behind inflation. One of them is non-performing loans.


 At least in the context of Bangladesh, bad debt is an important factor. If the loan from the bank is not paid, then the loan is called non-performing loan. Think that a person has taken a loan of 20 taka from 100 taka in Bangladesh. As long as twenty rupees of debt remain in the country, the total currency value of the country will remain at one hundred rupees. That means the price of each mango will be ten rupees. But if that person converts twenty rupees of the loan into dollars and spends it abroad and he cannot repay the loan. Then several problems are created. First of all, those twenty takas are no longer in Bangladesh due to conversion to dollars. But according to the central bank, the total money of Bangladesh is still 100. But the actual money is eighty rupees. The government prints twenty taka extra to cover the loss of that defaulted twenty taka. That is, the total value of the bank becomes one hundred and twenty taka. But the actual money is only eighty rupees. Now let's discuss about how the price of goods increases due to bad loans and smuggling of country's money abroad.


As new money is printed due to defaults, there will be inflation. That is, the price of the same mango was ten rupees before. Now it will be twelve rupees. This matter would not have much effect if there were really one hundred and twenty rupees in the country. Then the purchasing power of the people would also increase along with the increase in the price of the product. Since there is no one hundred and twenty rupees in the country, there are eighty rupees. That means forty rupees have been lost from the country's economy. As a result we have eighty rupees. But we have to buy the product at such a price that we only have one hundred and twenty rupees. The amount of non-performing loans in the bank sector of Bangladesh is increasing. From the statement of Bangladesh Bank, it is known that at the end of 2020, the amount of bad loans was ninety four thousand four hundred and forty crores. At the end of 2021, the amount of defaulted loans has increased to one hundred and sixty eight crore taka. In one year, the bad loans in the banks have increased by five thousand seven hundred and eighty crore rupees.



 The defaults of more than lakhs of rupees have weakened our economy from within. But we are paying the price while purchasing the product as if that one lakh one hundred and sixty eight crore taka is attached to our currency. That's why three hundred taka beef has risen to seven hundred taka. But people's purchasing power is still at that three hundred rupees. Apart from this, between 2009 and 2015, four hundred and ninety-six thousand crores of rupees were smuggled. The exact amount of money laundering in recent times is not known. However, from past surveys, it can be assumed that every year an average of about lakhs of rupees is being smuggled out of the country. Bankers in Bangladesh say the country's record of bad debt is three times higher than the real figure. Even if the loan is not collected, it is not defaulted for years. Again the same loan is rescheduled again and again and the loan is kept regular. As a result, the amount of non-performing loans appears to be low.



The International Monetary Fund or IMF published a report on the banking sector of Bangladesh in the middle of 2019. It has been said that there are defaulted loans in Bangladesh. Here the information about defaulted loans is much more than the actual defaulted loans. According to IMF, the amount of non-performing loans in Bangladesh will be around two and a half lakh crores. Bangladesh Bureau of Statistics estimates from two thousand seventeen to two thousand twenty one. The inflation rate in these four years is twenty-eight percent. In other words, the products that could be bought for one hundred taka in the year two thousand and seventeen, in two thousand and twenty one, one has to spend about one hundred and thirty one taka to buy that product.


Inflation in reality is much higher than official estimates. According to the information of the Consumer Association of Bangladesh, the prices of all the daily necessities of Bangladesh have increased by more than fifty percent in the last five years. Inflation, defaults and commodity prices continue to rise. But people's income is not increasing that way. Rather, income has decreased in many cases. Many middle class jobs have been lost in the past two years due to the Corona epidemic. Even those who have a job did not get a salary increase for two years. Rather, thirty to forty percent of some people's salaries have been reduced on the pretext of the epidemic. Or the owner has left salary arrears. Many of the middle class have now moved into the ranks of the lower middle class. Bangladesh has turned from a low-income country to a middle-income country, but its impact on the lives of ordinary people has been very little. Sri Lanka is one example of how dire a country's inflation and foreign exchange crisis can be. The situation in Sri Lanka is so dire that the government does not even have money to buy essential commodities and fuel. He has thousands of crores of foreign debt. The country is on the verge of bankruptcy today due to unplanned development and reckless borrowing.

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