BDPolicyLab: Independent Policy Research for Bangladesh

Bangladesh Cost of Living Monitor

Executive Summary

The food basket for a Bangladeshi family of five costs Tk 7,310/month ($60). It absorbs 47% of a day-labourer's monthly income and 58% of the RMG minimum wage, both of which have no inflation-indexation mechanism. Headline CPI stands at 10.5%, with food inflation at 12.5% running +5.0 percentage points above non-food inflation (7.5%). The food-nonfood wedge is structurally regressive: households with BBS HIES 2022 food expenditure shares of 47% bear the full force of food price acceleration. Three actions have the highest leverage: automatic minimum wage indexation to food CPI, a universal digital food subsidy card covering all 64 districts, and a worker housing finance window tied to NID.

Basket Cost and Price Dynamics

The 11-item WFP basket breaks down as follows:

Rice (coarse): Tk 55.00/kg (MoM N/A, basket line Tk 1,375)
Lentils: Tk 130.00/kg (MoM N/A, basket line Tk 520)
Soybean oil: Tk 175.00/L (MoM N/A, basket line Tk 700)
Sugar: Tk 120.00/kg (MoM N/A, basket line Tk 240)
Eggs: Tk 13.00/pcs (MoM N/A, basket line Tk 780)
Potatoes: Tk 35.00/kg (MoM N/A, basket line Tk 280)
Onions: Tk 70.00/kg (MoM N/A, basket line Tk 280)
Wheat flour: Tk 55.00/kg (MoM N/A, basket line Tk 165)
Chicken: Tk 290.00/kg (MoM N/A, basket line Tk 1,160)
Milk: Tk 90.00/L (MoM N/A, basket line Tk 720)
Diesel: Tk 109.00/L (MoM N/A, basket line Tk 1,090)

Rice (25 kg) anchors the basket at 19% of total cost (Tk 1,375). Import-dependent items (soybean oil, wheat flour, lentils, sugar, diesel) account for 37% of basket cost at Tk 2,715; domestic items contribute Tk 4,595. At the current exchange rate of Tk 122.84/USD, every 1% taka depreciation raises the import-dependent share by approximately 1%, with 2-4 week pass-through for edible oils and 4-8 weeks for wheat and lentils.

Price movers this period. Top risers: Rice (coarse), Lentils, Soybean oil. Top moderators: Chicken, Milk, Diesel.

Wage Adequacy: Three Benchmarks

The affordability problem is structural, not cyclical.

Day-labourer (BBS LFS 2023 median). Tk 600/day x 26 working days = Tk 15,600/month. The basket consumes 47% of that, leaving Tk 8,290 for housing, transport, healthcare, education, and clothing for five people. The upper poverty line is Tk 2,268/person/month (BBS HIES 2022): a five-person household at that threshold earns Tk 11,340/month for all expenses combined, and food alone already consumes 64% of that, leaving nothing for rent, transport, or healthcare.

RMG worker (2023 Gazette revision). The Tk 12,500 minimum wage absorbs 58% on the food basket alone, rendering it strained. Food inflation at 12.5% implies a real wage loss of -12.5% since the 2023 revision, because no automatic indexation exists. The RMG wage board has reviewed wages every five-plus years on average.

Public sector Grade 20 (NPS 2015). At Tk 8,250/month, the basket consumes 89% of gross pay. The 2015 pay scale has not been revised in a decade; cumulative food price inflation over that period has exceeded 70%.

The informal sector, roughly 85% of the labor force (BBS LFS 2023), operates with no wage floor at all. For rickshaw pullers, construction workers, and domestic workers, the basket-to-income ratio is the sole welfare indicator, and it is deteriorating.

Commodity Price Stabilization: Structural Gaps

Bangladesh operates two price intervention instruments: Open Market Sales (OMS) and TCB fair-price outlets. Both are insufficient at current scale.

OMS activates during price spikes rather than running continuously; daily allocations in most centers exhaust within 2-3 hours. TCB coverage reaches fewer than half of Bangladesh's 64 districts and carries only 4-5 product lines, consistently excluding edible oil and lentils despite both being import-dependent and price-volatile. The 37% import dependence of the basket means that soybean oil (Chicago Board of Trade benchmark), lentils (Canadian and Australian pulse markets), and wheat flour (Black Sea futures) move on global supply signals that domestic intervention cannot offset without scale and speed.

BIDS studies document rice farmer-to-consumer spreads exceeding 40%, with cold-chain spoilage of 25-40% for perishables priced into retail costs. Market structure reform, not just volume intervention, is required.

Housing and Utilities Burden

Dhaka housing absorbs 42% of household income (REHAB 2023), rising to 50% or above for workers in Mirpur, Tongi, and Gazipur industrial corridors. BHBFC and commercial mortgage products require formal income documentation that informal and RMG workers cannot provide.

Electricity: BERC lifeline slab (0-75 units) at Tk 4.19/kWh; general slab (201-300 units) at Tk 8.70/kWh. Multiple BERC tariff orders since 2022, driven by IMF subsidy rationalization conditions, have raised effective electricity costs for middle-income households by 30-40%. Metered gas prices roughly doubled between 2022 and 2024. These administered price increases add step-function jumps to non-food CPI (7.5%) and compress the residual budget for food, healthcare, and education.

Safety net transfer values have not kept pace with food prices. Old Age Allowance, Widow Allowance, and Disability Allowance stand at Tk 500-750/month, covering less than one quarter of the current food basket cost. VGD provides 10-30 kg of rice or wheat per household monthly (market value approximately Tk 550-1,950 at current prices). VGF operates seasonally. None of these programs are indexed to the WFP basket or BBS food CPI.

Healthcare out-of-pocket expenditure at 72% of total health spending (WHO National Health Accounts) is among the highest in South Asia. A single hospitalization costs Tk 15,000-50,000 (IEDCR/BIDS estimates), equivalent to 1-3 months of the food basket, and pushes households into medical debt. With 47% of day-labourer income pre-committed to food and 42% to housing, one healthcare event eliminates all remaining liquidity.

Scenarios: Base Case and Downside Risk

Base case (current conditions persist): basket at Tk 7,310/month, food inflation at 12.5%, exchange rate at Tk 122.84/USD. Real wages continue to erode at approximately 12.5% per year for workers without indexed pay. The 47% basket-to-income ratio for day-labourers remains the binding constraint.

Risk case (10% taka depreciation): import-dependent items (37% of basket, Tk 2,715) rise by 10%, pushing the basket to approximately Tk 7,582/month. The basket-to-RMG-wage ratio rises to 60.7%, compressing the residual budget for housing, transport, healthcare, and education. Bangladesh Bank foreign reserve adequacy is therefore a first-order cost-of-living variable, not merely a monetary policy indicator.

Priority Recommendations

1. Index minimum wages to food CPI automatically. Legislate annual RMG and public sector wage adjustments when cumulative BBS food CPI change since the last revision exceeds 5%. The mechanism eliminates the five-year political cycle and the real-wage erosion it produces. Design cost: administrative; fiscal cost falls on employers (RMG) and budget (public sector).

2. Convert OMS/TCB into a universal digital food subsidy. Issue NID-linked food security cards redeemable at designated retailers. Index the benefit value to the WFP basket cost. Expand product coverage to include edible oil and lentils. Scale to all 64 districts within 36 months. This transforms a reactive, geographically concentrated program into a continuous, demand-driven safety net.

3. Open a dedicated worker housing finance window. Mandate BHBFC and two state-owned commercial banks to offer mortgage products with simplified documentation (employer letter plus NID) for RMG and informal sector workers at below-market interest rates. Pair with density-zoning reform near Gazipur, Narayanganj, and Chattogram EPZ corridors to expand supply.

4. Rationalize tariff relief on import-dependent basket items. Maintain zero or minimal import duty on soybean oil, lentils, wheat, and sugar during periods when the food-nonfood CPI wedge exceeds +5.0 percentage points. Pair with an automatic trigger mechanism so relief activates without discretionary Cabinet orders, reducing response lag from 8-12 weeks to 2-4 weeks.

5. Raise social protection transfer values and index forward. Increase Old Age, Widow, and Disability allowances to at least Tk 2,000/month and index to the BBS food CPI from that base. Transition VGD from in-kind rice to a hybrid cash-and-kind transfer that accounts for cooking oil and lentils, which rice alone cannot substitute.

Sources: WFP Bangladesh Food Price Monitoring, Bangladesh Bank CPI data, BBS HIES 2022, BBS LFS 2023, WHO National Health Accounts, BERC tariff schedules, REHAB 2023 housing survey, BIDS market studies.

Cost of Living