Pandemic recovery unlikely due to fuel price hike13 August 2022
Md Yasin Ali :
The sudden unprecedented and ruthless fuel price hike declared by the government puts a ratchet effect in all strata of society. The Russia and Ukraine war adds great woes to the world energy sector. Since the Russian invasion in Ukraine the superpower America imposed various sanction to weaken Russian economy that causes a slowdown in supply chain and adds heavy suffering in people livings and livelihood around the world.
The country's forex reverse stood at $39.48 billion on July 28 this year, compared to $46.15 billion on December 30 last year. To ease the pressure on country's forex reserve government take austerity measure regarding import and luxury spending. Import in July fell by 31 percent to &5.50 billion from $7.96 billion a month ago while remittance went up by 14 percent to $ 2.09 billion from $ 1.83 billion shows Bangladesh bank. Banks were asked to take up to 100 percent advance payments from businesses for opening letter of credits(LCs) to import luxury and non-essential items to save the greenback in the backdrop of global volatile market that a some breathing space for forex reserves.
The import payment stood at $ 82.49 billion in FY22, up 36 percent in FY 21, while remittance fell 15 percent to $21.03 billion in FY22. Export earnings stood at $ 49.26 billion in FY22, up 33.45 percent year-on-year. Falling prices of some commodities in the international market would help Bangladesh manage its volatility in the financial sector but import payments are unlikely to fall substantially as the current price of petroleum may remain high.
The recent fuel price surge and spillover effects weigh down fixed, limited and low-income groups due to multifaceted and ratchet effects. The burden of the arbitrary, overnight leap in fuel prices will be borne by the people of the country. Already people are feeling the pinch of exorbitant fuel price. It will increase food price, bus fare, commodities price, cost of treatment and reduce real income and erode people purchasing power as well as inequality in the society.
Flash flood, on rush water from the upstream, frequent natural calamities, pest attack, low rain fall and recent fertilizer price hike burdening the farmers with an increased production cost and production loss that incur huge losses to the farmers. Another brunt bear by the farmers of Bangladesh is that recent fuel price hike which causes rise of production cost per acre. The sudden 42.5 percent rise in diesel cost is likely to make them spend an additional Tk 4000 in irrigation for per hectare boro production. The average cost of boro production on every hectare was Tk 64,862 excluding family labor and land rent; found a study by the international food policy Research institute (IFPRI) two years back. Of the total cost, Tk 14075 or 21.7 percent goes to irrigation, diesel alone accounts for around 70 percent of the total irrigation cost, according to the study.
The country's farmers are highly dependent on diesel particularly for irrigating and tilling and threshing their crops. Paddy farming burnt over 15 percent of total 46 lakh tones of diesel used in fiscal year 2020-21, shows data Bangladesh Petroleum Corporation. So fuel price hike not only affect our forex reserve but also a multi-pronged impact. So we should deeply consider it.
(The writer is a development thinker).