In a market economy, government does not have the main responsibility for controlling prices. However, government, as a guardian of the economy, has certain obligations to fulfil. For example, it has to ensure that the market functions properly and economic activities are carried out without any bottle-necks.

There are a lot of reasons for price-hike. In an expanding economy, production is high and land, labour and capital are more in use. Consequently, prices go up and so does the cost of production, generating cost-push inflation.

Higher inflation causes prices to go up. Government is rightly citing higher price of imported goods as a reason for the current inflation. Another reason for the price hike is reduction in imports.

The most important thing is to ensure coordination between demand and supply. For instance, the supply flow may be disrupted for some reasons. The shortfall in supply may be caused by a host of factors including stagnation or reduction in production in the face of increasing population and higher money income. That will cause an excess demand and prices will have to go up beyond the normal levels.

A very critical factor in the mismatch of supply and demand may be obstruction in the free movement of some goods or a part thereof or a deliberate withholding of supply, which is also called syndication.

'Cooperative' is not a nice word in our country but it is not a dirty word in any other country. Look at the price difference of commodities- what is sold at Tongi is one third of the price prevailing at Gulshan. So Market is not cooperating and this is because of syndication or for some other difficulties. Indeed supply is not moving. Hence forming producers' cooperatives could eliminate such huge price differences.

Transportation cost has increased; there are disruptions in the retail level marketing. The price of essential goods has also increased in the international market. And there is stagnation in agricultural production.

There is absolutely no crop insurance in Bangladesh. Urgent steps should be taken to bring about a system of crop insurance.

Already the Government has announced that they will provide agro credit of Tk 80000 crore to farmers, most of it through public sector banks. The private sector banks and NGOs are not doing anything about agro credit. They should not shy away from providing agricultural credit. Agriculture is our lifeline.

Consumers Rights Protection Law should be put into effect as soon as possible.

The discovery of a natural gas (CNG) based pump and that by a Bangladeshi scientist of an insecticide by inducing male insects through a chemical compound smelling insects are good news. These are expected to save huge amounts of foreign exchange.

There is no alternative to growers' cooperative. After all it may be difficult for a farmer to bring commodities to city markets but hundreds of farmers can do this task easily and sell their goods at a lower price. This will ensure products at a cheaper price for the consumer. So, this becomes a win-win situation for both the farmer and the consumer.

Increasing the number of importers is essential. Restoring the retail level supply chain by rehabilitating hawkers would indeed yield positive results in price reduction.

The following are the views expressed by Professor Abu Ahmed, Director of BAPEX, Advisor, Security Exchange Commission, Director Chittagong Stock Exchange (CSE) and former chairman, Bangladesh Shilpa Bank (BSB) and former Dean, faculty of Social Science, Dhaka University.

Not only has the price of essential commodities risen in the international market, Taka has been devalued significantly against the dollar as well. As a result, import is now expensive.

When the value of the Taka against the dollar was depreciating Bangladesh Bank remained indifferent on the grounds that because of the floating exchange rate of the currency, the Bank was not in a position to intervene. The devaluation of the Bangladesh currency caused the price of raw materials to increase, which in turn led to an increase in the cost of production.

There was a program, I'd say, sold buy International Monetary Fund (IMF); it was called PRGF (Poverty Reduction Growth Facility). Under that program IMF prescribed a contractionary monetary policy in 2005. Credit flow was reduced from 20% to 14%. That meant payment to the private sector had to be trimmed or toned down. That decision affected our economy adversely because growth rates and other activities are connected with the private sector.

In 2006-2007 our economy grew by 7%; that was the highest growth in 35 years. But last year it was lower than 7% despite the fact that the credit flow was reduced.

In India and Pakistan credit flow was never reversed but rather credit flow in the private sector was increased. Unfortunately Bangladesh listens to IMF. At the time of accepting the IMF prescription, it was argued that contractionary monetary policy was needed to fight the inflation, which was then only 4.5%. It is this policy that contributed substantially to the price hike.

In line with the IMF prescription certain measures were taken during that timeprompting the interest rate to go up. The interest rate was of course never that low in Bangladesh economy. The highest lending rate about 14% was reduced to 12% for a short time.

Some other policies of IMF such as reducing subsidies for the vital sectors and increasing the price of Energy and in its wake that of fertilizers have had an adverse effect on the economy. Due to these policies financial cost of borrowing went up, cost of inputs went up and cost of irrigation and transportation went up. All these prices are interrelated and together they pushed all other prices. Thus Bangladesh economy enters the resume of price hike.

Bangladesh Bank (BB) should not follow IMF policies blindly. BB compromised all its sphere nets with the IMF and this was a big mistake. Now I hear price has increased on account of supply constraint. But why supply constraint? Because credit flow to the private sector went down? Without proper investment or flow of fund, supply or production cannot be increased. Now it is quite late for us to reverse the situation.

China is experiencing 11% growth rate with only 5.5% inflation rate. According to a general economic theory the higher the growth level an economy achieves the higher the inflation rate should be. But, in the case of India and China the reverse is true. Now-a-days economics is also taking to the idea that it is not necessary that high growth shall have to be accomplished by a high inflation rate. High growth can pull a low inflation rate too. Our economy was achieving higher growth rate with low inflation rate but the anti-growth antigen monetary policy prescribed by IMF and pursued or contracted by BB has pushed back our investment and reduced our growth rate to 6% now.

The notion that inflation is everywhere and so it is a monetary phenomenon cannot explain away the adverse effects of inflation. This notion developed by Chicago schools may well fit in with an advanced economy where there is full employment but for us the better option is to allow the credit flow to increase in the private sector-say this year 20%, next year 22% and the following year 25%.

Government should take proper steps to promote investment. Private sector should be more active in terms of investment decision.

Oil price has affected production. In urban areas demand for octane is high while diesel and kerosene are mainly used by poor people. Subsidy should be given to this sector. Bangladesh Petroleum Corporation (BPC) should be made a holding company. 49% of the share should be in the market and a representative taken on the board. The corporation should be reorganized or restructured. Otherwise it will not be free from the corruption net.

With more supply in the market, price will gradually go down. In the mean time, Bangladesh needs to pursue a liberal monetary policy.