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… Food prices rose by 11 percent last year 

MB Subba

The government can do little to control commodity prices as the economy is facing an unprecedented situation due to the Covid-19 pandemic, Prime Minister Dr Lotay Tshering has said.

Lyonchhen at the first virtual meet the press on April 30 said that many people were complaining about high commodity prices. “But the inflation in our market is a direct reflection of prices in India,” he said, adding that it would be unfair to blame the government.

He said that it was not possible to maintain the pre-pandemic prices in the Bhutanese market as the prices in India had increased. Citing an example, he said that a pon (80 pieces) of imported doma (betel nut) today costs up to Nu 750, up from about Nu 400 before the pandemic.

However, lyonchhen said that there had been not much impact on livelihoods during the pandemic except that people faced physical restrictions and the mental stress of getting infected and the country going into lockdown.

He said that the flow of money was not affected as the economy was mainly driven by the government’s spending, which was increased to offset the impact of Covid-19 on the economic growth. The government has allocated Nu 38.946B, which is 33 percent of the 12th Plan budget capital, as capital budget for the ongoing fiscal year.

But an increased government spending, according to economists, gives rise to inflation.

Dr Lotay Tshering said that His Majesty’s Relief Kidu programme had also kept money flowing in the economy. “The individual consumption capacity has not decreased,” Lyonchhen said.

Vegetables, meat, dairy products and betel nuts continue to be the main contributor to the overall increase in the inflation following import restrictions in view of the Covid-19 pandemic, according to the National Statistics Bureau of Bhutan (NSB).

High inflation, according to economists, makes it more difficult for people to afford basic necessities and causes families to struggle as they attempt to keep up with prices.

According to the NSB’s Consumer Price Index for February 2021, commodity prices rose significantly last year as the measures taken to contain Covid-19 had a major impact on food supplies.

The average annual consumer price saw an increase of 5.63 percent in 2020 compared to 2.73 percent increase in 2019.

Food prices last year increased by 11.09 percent as compared to 3.44 percent in the previous year. This means if a family spent Nu 5,000 a month on food items in 2019, the expenditure for the same increased by about 550 last year.

Food prices climbed sharply in the closing months of the fiscal year 2019-20 because of supply disruptions from India coupled with panic buying.

The NSB report, however, highlights that the annual average price of non-food items was not affected significantly. Non-food prices recorded an increase of 1.24 percent in 2020 compared to 2.24 percent in 2019.

As a result of the price increase in the economy, the purchasing power of the ngultrum (PPN) decreased by 7.16 percent in the past 12 months (from December 2019 to November 2020), according to NSB.

The PPN as measured by consumer price index (CPI) is Nu 66 as of December 2020 compared to December 2012. This means that Nu 100 in December 2020 is worth Nu 66 at December 2012 prices.

The CPI is a measure of average price changes in the basket of goods and services purchased by households over time.

Observers say that the government could employ monetary and fiscal policies to fight the inflation.

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