National, Back Page

Rising fuel prices to create new pressure on economy

Published : 08 Nov 2021 09:59 PM | Updated : 09 Nov 2021 03:38 PM

As the country's economy begins to recover from the corona shock, rising fuel prices will put new pressure on the economy.

Economists and experts said domestic demand has picked up as the corona situation returns to normal.

As a result, economic activities are going on, they said, adding that rising oil prices could hurt the country’s economy.

Fuel is a sensitive product as the impact of inflation of fuel is far-reaching in the economy, an economist told Bangladesh Post.

Read more: US finally reopening borders after 20 months

“It affects life in many ways. In the meantime, the prices of everything including daily necessities have gone up. Increased transport fares,” he mentioned.

M Shamsul Alam, energy expert and energy adviser of Consumers Association of Bangladesh (CAB), told Bangladesh Post that rising prices of diesel and kerosene have reduced consumer purchasing power, as their income has not increased.

“Rising oil prices will reduce people's purchasing power as well as reduce consumption costs. The economy will shrink. As a result, the country's economy as a whole is at risk,” he mentioned.

While the prices of everything, including daily necessities, were skyrocketing, it was not clear why the price of oil was increased at this time, he said adding that, “The cost of human consumption is reduced. GDP growth is hampered.”

However, the government has increased the price of diesel and kerosene by Tk 15 per liter or 23 percent by issuing a notification on Wednesday.

The price of diesel and kerosene was fixed at Tk 80 per liter, up from Tk 65 earlier.

At present, the use of diesel in agriculture is 16 percent. Increasing the price of diesel will increase the cost of irrigation. This will increase the production cost of agricultural products.

Diesel consumption in electricity is 26 percent. Most of the power plants in the country are diesel and furnace oil powered. As a result, the price of electricity is expected to increase.

Economists say rising fuel prices will reduce revenue earnings for the country.

For the reason that, when the purchasing power of the people decreases, the consumption expenditure decreases, they said adding that, this shrinks the economy.

In addition, when the economy shrinks, it has a negative impact on the collection of value added tax or VAT and income tax, they mentioned.

Economist Zaid Bakht, the chairman of the state-owned Agrani Bank and former senior director of the Bangladesh Institute of Development Studies (BIDS), said, “There is already inflationary pressure in the economy. The rise in fuel prices will only increase the pressure on the country’s economy.”

The country's economy was recovering as the situation in Corona returned to normal, he said, adding that it is likely to be affected by the rise in oil prices.

He said, “It was not right to raise fuel prices at this time to avoid economic risks.”

However, agricultural and industrial production is associated with fuel. This will devalue the wages of the people as the purchasing power of people is reduced due to corona pandemic.

Unemployment, new poverty, ordinary people are in trouble. The hunger of the lower class and marginalized people has also started. Another increase in fuel prices will only add to their misery.

Related Topics