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Is the Fuel Price Hike in Bangladesh a Sign of an Ongoing Economic Crisis? All You Need to Know

By: News Desk

News18.com

Last Updated: August 08, 2022, 15:16 IST

Dhaka

People refuel their motorcycles at a gasoline station after fuel price surge up to fifty percent in Dhaka, Bangladesh (Image: Reuters)

People refuel their motorcycles at a gasoline station after fuel price surge up to fifty percent in Dhaka, Bangladesh (Image: Reuters)

The long queues outside Bangladesh gas stations sparked fears that the country is following the footsteps of its Sri Lanka. All is not well but Dhaka should’ve sought help earlier

Bangladesh’s capital Dhaka witnessed long queues outside petrol stations over the weekend as the government raised fuel prices.

The long queues outside the petrol stations sparked fears that Dhaka may be on the same trajectory like Dhaka and Islamabad but the brighter side is that Bangladesh, unlike its Asian neighbours, has not defaulted on its payments.

How much is the oil price hike?

The government announced that it hiked fuel prices by up to 51.7%. Now petrol prices are Tk 130, up by Tk 44 or almost 52%. The energy ministry said that the prices were raised as fuel prices in the international market are a lot higher compared to Bangladesh.

The government also said that the price hike was due to the fear of smuggling of fuel out of the country. This is the highest increase since independence.

What does it mean for the common people of Bangladesh?

The common people of Bangladesh have to bear the brunt of the rising fuel prices and the rising inflation.

Poverty in Bangladesh has been an issue since its independence in 1971 and by 2026 is expected to rise from its Least Developed Country (LDC) status to a developing country.

But several regions of Bangladesh, especially the Chittagong region in its south and its other southeastern regions are impoverished.

The fuel hike has led to immediate fare hikes for buses, ferries and auto rickshaws. The fuel price hike also meant a hike in kerosene prices which means more trouble for poor families who use kerosene to cook.

Why the oil price hike?

The Bangladesh government hiked oil prices because it needs a $4.5 billion loan package or a bailout from the International Monetary Fund (IMF).

Bangladesh’s trade deficit has reached $33.25 billion and remittances are down by 15%. The Bangladesh government has also seen its forex reserves fall below $40 billion.

Illinois State University professor Ali Riaz while penning an analysis for Bangladesh daily The Daily Star said: “Even the simplest accounting puts a difference of about USD 10 billion between the official statistics and the real numbers. As such, the economic crisis is not as small as the official rhetoric suggests.”

The government failed to take note of the ongoing economic crisis plaguing Bangladesh and also failed to control its domestic borrowing and also borrowing from international lenders.

The IMF will only issue the loan if the government approves withdrawal of subsidies from the energy sector along with other conditions.

What are the fears? What is the reaction?

An editorial by Bangladesh daily The Daily Star termed the move as an ‘unbearable blow’ on the common people. They also said it was a ‘black day’ in the history of fuel price hikes in the country.

There are fears that such high prices will increase inflation in the economy. Economic experts said the expected price rise in gas, electricity and water would hamper economic growth.

“It is unacceptable for the government to push the cost of its corruption, mismanagement and bad policies onto the people,” the Daily Star editorial said.

Why the crisis?

Ali Riaz cited an essay by Simon Johnson, who worked as the chief economist of the IMF between 2007 and 2008 and said that these events are a byproduct of the powerful elites within emerging market nations having close access to the government.

These elites took too many risks and felt that once problems arise, the government will take care of the issue. He also said that such-oligarchic attitudes by the government and the elite leads to a political system that offers no benefits to the poor and hurts the basis of the economy.

(with inputs from the Daily Star)

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first published:August 08, 2022, 14:33 IST
last updated:August 08, 2022, 15:16 IST