Commerce Minister explains why fuel price hike ‘won’t significantly raise inflation’

The Minister for Industries and Commerce, Khandakar Abdul Muktadir, has claimed that the recent increase in fuel prices will not significantly drive up inflation.

“It is important to understand why inflation will not rise substantially. Compared to the scale of global fuel price increases, the adjustment in Bangladesh has been relatively minimal,” he said.

He made the remarks in Parliament while responding to a supplementary question from independent member of parliament Rumeen Farhana on Monday.

The question-and-answer session was held at the beginning of the sitting, presided over by Deputy Speaker Kayser Kamal.

Referring to the rise in fuel prices, Rumeen Farhana asked the minister whether any measures would be taken to control inflation, and if so, what those measures would be.

In response, the minister elaborated on why inflationary pressure would remain limited.

He noted that in the United States, fuel prices vary by state due to differing tax structures. Before the war, prices in many states stood at around $2.8 per gallon, which have now risen to over $5.

He argued that, when compared with neighbouring countries or economies similar to Bangladesh, fuel prices have increased far more sharply elsewhere. In many countries, such price adjustments occur automatically, without the need for specific government intervention.

“In our case, the price of diesel has been raised from Tk 100 to Tk 115. Just to put this into perspective, fuel typically accounts for around 7 to 8 per cent of a factory’s total cost of production. If we consider that portion as 100 per cent, a 15 per cent increase in diesel prices has only a marginal impact on overall costs,” Khandakar Abdul Muktadir explained.

He added that in the transport sector, a bus travelling 200 kilometres consumes roughly 25 to 30 litres of diesel. The increase in fuel cost for 30 litres amounts to approximately Tk 450. When distributed across goods transported by a truck—often around 10,000 kilograms—the additional cost per unit remains minimal.

“On the surface, it may appear that fuel price increases will have a major inflationary effect,” the minister said. “However, when calculated on a per-unit basis of transported goods, the impact is not a significant driver of inflation. That said, no economy can afford to lose its fundamental balance. We have followed the same policy approach adopted globally, but in a modest manner, with a moderate adjustment in prices.”

Responding to a question from Bangladesh Nationalist Party (BNP) MP Shamsur Rahman Shimul, the minister said instability in the Middle East has already put pressure on Bangladesh’s exports. If the situation persists, there is also a risk of pressure on remittance inflows.

He noted that recent tensions in the Middle East (military frictions involving Iran, the United States, and Israel) could affect the global economy and trade, and Bangladesh would not be immune. The Middle East remains a key trading partner for Bangladesh, with exports including ready-made garments, pharmaceuticals, frozen foods, and leather goods to markets such as the United Arab Emirates, Saudi Arabia, Qatar, and Oman.

The minister stated that the ongoing instability has contributed to rising fuel prices, increased import costs, higher shipping and insurance expenses, potential declines in exports to Middle Eastern markets, upward pressure on commodity prices, and challenges to remittance flows.

In response to a question from BNP MP SM Jahangir Hossain, the minister said Bangladesh runs trade deficits with all the SAARC countries, except Nepal, Sri Lanka, and the Maldives.

According to the minister, the largest deficit is with India, amounting to $7.86 billion. Bangladesh also records deficits of $681 million with Pakistan, $10.71 million with Afghanistan, and $29.77 million with Bhutan. Conversely, the country enjoys trade surpluses of $29.9 million with Nepal, $6.25 million with Sri Lanka, and $2.85 million with the Maldives.

Replying to a question from BNP MP Abul Kalam, the minister presented export figures for the past five years. According to the data: FY2020–21: $45.37 billion, FY2021–22: $60.97 billion, FY2022–23: $53.93 billion, FY2023–24: $51.11 billion, FY2024–25: $55.19 billion

Responding to a question from Nasir Uddin Ahmed, MP for Moulvibazar-1, Expatriates’ Welfare and Overseas Employment Minister Ariful Haque Choudhury said that more than 13 million Bangladeshis are currently employed in 176 countries worldwide.

In his absence, State Minister Nurul Haque Noor responded to questions on his behalf.

In reply to a query from independent MP Sheikh Mujibur Rahman Iqbal, it was stated that a total of 14,481,745 workers have been sent abroad from 2004 to the present.