At a time when ordinary people’s purchasing capacity has been declining steadily and private-sector investment is slowing, the decision to raise the prices of all types of fuel by Tk 20 a litre at one go will have an impact across the entire economy.
The pressure from this increase in the price of the strategic commodity of fuel will not be confined to the transport sector; costs will rise across food, agriculture, industry and services. It will place a fresh burden of inflation on ordinary people, who have already been losing real income for four and a half years.
Most concerning of all, the government has yet to make its position clear on how it plans to deal with the economic fallout and the new inflationary pressure created by the fuel price increase.
The war and conflict in the Middle East have made global energy markets increasingly uncertain and pushed prices upward, and the entire world is having to bear the cost. As an import-dependent country, Bangladesh is naturally more exposed to its effects. Fuel prices were raised once in April after the war began. As a result, during the tenure of the current government, fuel prices of all types have now increased by Tk 35 to Tk 45 a litre in two rounds.
According to a notification from the Energy Division, Bangladesh Petroleum Corporation (BPC) is incurring huge daily losses because of rising fuel prices in the international market and higher transportation costs. It also cited concerns about smuggling because fuel prices in Bangladesh are lower than in neighbouring countries.
Even while acknowledging the realities of the war in the Middle East and fuel price increases in neighbouring countries, the question must be asked: at this fragile juncture for the economy, was there no alternative to raising fuel prices by Tk 20 a litre at one go? Government figures suggest that the price increase could reduce BPC’s losses by Tk 100 billion.
But it will also inevitably push up the prices of goods and services, further slowing production and trade and, as a consequence, reducing the purchasing power of a large number of people. In that case, the government could end up losing more revenue than it saves through reduced subsidies.
More importantly, although the government talks about subsidies, fuel is already subject to high rates of VAT and taxes. This means there was scope to reduce taxes and adjust fuel prices during this crisis.
The government should remember that the Awami League government, which was ousted in the 2024 mass uprising, raised fuel prices by the largest margin in a single step in August 2022.
The resulting impact pushed inflation up by 2 percentage points within a month, and the country has still not been able to escape the grip of the high inflation that followed. As a result, the real incomes of a large number of people have fallen substantially.
Another concern is that, despite the fragile state of the global and domestic economies, the salaries and allowances of government employees have been increased by 100 to 142 per cent.
It is true that raising the salaries and allowances of government employees was necessary in view of inflation. But the huge amount of money required because of such a sharp increase has raised serious questions and concerns about how it will be financed.
Imposing a fresh tax burden on the public, reducing subsidies on fuel and fertiliser, or taking loans from domestic and foreign sources to finance the additional expenditure cannot be considered acceptable.
The government should remember that inflation is not a crisis affecting only the country’s 1.4 to 1.5 million government employees; its greatest impact is being felt by people with low and limited incomes. Where are the government’s measures to protect them?