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Bangladesh - Corporate - August 6, 2022

Increase in fuel prices to increase inflation

Staff Correspondent: Economists have expressed fear that the country’s economy will have a major negative impact due to the abnormal increase in fuel prices. According to them, the standard of living of the common people will go down further. Along with transportation costs, production costs will also increase. This will increase inflation. Besides, the income of marginalized people will fall further below the poverty line.
In this regard, the caretaker government’s former financial adviser. AB Mirza Azizul Islam told on Saturday, “Due to the abnormal increase in the price of fuel oil, the production cost will also increase along with the transportation cost. Especially if the price of diesel increases, the cost of irrigation will increase. Aman rice production will be disrupted. This will reduce food production. As a result, the agricultural sector will be under great pressure.
He said, ‘Inflation will increase due to increase in transportation and production costs. This will put the poor, ultra-poor and low-income marginalized people under great pressure. The rate of poverty in the country will increase. All in all, the economy of the country may cause great instability. Mirza Aziz said, “The price of fuel oil in the international market is slightly lower now. Still, the government has hiked prices due to reduced subsidies.
By doing this, the government should no longer have subsidies. As a result, the government should adjust the price of fuel oil in the international market.
On the other hand, Ahsan H. Mansoor, executive director of the private research organization Policy Research Institute (PRI), said, “The price of fuel oil could have been kept at a tolerable level. The way the price was increased without doing that is beyond thinking.
He said, “Now the price of daily products will increase a lot. Which will go beyond people’s purchasing power. People’s expenditure will increase but if the income does not increase, the poor people will face a big crisis. As a result, many people will become poor from poor.
In response to a question, he said, “I can’t say whether the government has increased the price of fuel to get the IMF loan.” We do not know what agreement the government has with the IMF for the loan. However, there is enough reason to doubt whether the price of oil has been increased as per the IMF because of the increase in the price of fuel oil after the increase in the price of fertilizers.
He said, ‘Due to increase in the price of fuel oil, inflation will increase in Bangladesh like other countries of the world. However, if the price of fuel oil falls internationally, if the government adjusts it, inflation will come down.
He said, ‘The government should let the economy run its own way. To do this, remove the cap on the interest rate of bank loans and deposits.
It is noted that the price of fuel oil has been increased in a notification of the Ministry of Energy on Friday night. According to the increased price, the price of diesel and kerosene per liter has been increased from Tk 80 to Tk 34 to Tk 114. Besides, the price of petrol has been increased from Tk 86 to Tk 130 per liter by Tk 44. Apart from this, the price of octane has been increased by Tk 46 per liter from Tk 89 to Tk 135. The new prices are effective from August 6.
Earlier last November, the price of diesel and kerosene was increased by Tk 15 per litre. Then the price was fixed at Tk 80 per liter. After the diesel price hike, bus fares increased by about 27 percent, which is much higher than the rate of increase in oil prices. Similarly, the launch fare was increased by 35 percent. However, the Ministry of Energy said that BPC has made a loss of Tk 8 thousand 14 crore 51 lakh by selling fuel oil in the last six months (February to July).

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