In the interest of macroeconomic stability

Inflation has caused the worst headache for both the public and policymakers. It is both the cause and effect of macroeconomic mismanagement. In its budget-review discourse, the Centre for Policy Dialogue (CPD) has broadly identified why economy is not making a turnaround and inflation continues to hemorrhage it. At a time when global energy prices are on the decline, policymakers here are still sticking to profit-making by the Bangladesh Petroleum Corporation (BPC) in the name of subsidy adjustment. The CPD is categorical that subsidy adjustment cannot be based on a single instrument; rather there is need for an all-round reform. With such arcane policy instruments, macroeconomic stability, on the one hand, cannot be brought about and, on the other, socio-economic inequality reduced.

In fact, the policymakers have made a wrong choice of its main instrument, energy that is, for compliance of IMF condition. The state corporation, as the CPD points out, has made a net profit of Tk 364.74 billion after paying tax in the seven years from the financial year 2016 to 2021. Only in the FY2022, did it incur a loss of Tk27.08 billion. But by this time the prices of both fuel oil and gas have globally come down significantly. The price of crude oil has come down to $77 from $90 a barrel. Notably, the government raised the prices of energy when those were at their highest in international market. Logic demands, the price should be reviewed downward and this can have beneficial impacts on almost every area of the economy. The BPC has made enough profit, now in the interest of spurring productivity and taming inflation, it can dispense with its monopolistic profit. If the margin of profit of Tk5.0 for a litre of diesel is foregone, it can trigger a positive domino effect for economic productivity which is key to augmenting export and arresting inflation.

However, the government's excessive borrowing from banks, particularly the Bangladesh Bank is fuelling inflation by supplying money to the market. The result is disastrous for an economy as productivity falls and the majority people's purchasing power erodes. If the government's borrowed money helped create employment and wealth, it would have made sense. But that surely is not the case. Financing mega projects and sheer waste of money on such projects as captive power plants which now sit idle are contributing to the woes. There is no alternative to getting the priority right when it comes to government expenditure in time of financial crisis.

However, behind inflation business syndicates out to make the most of the disruption of international supply channels on account of Ukraine war are the main actors. When a kilogram of ginger from Myanmar, the import cost of which ---inclusive of duty--- stands at Tk 58 but sold in market at Tk 280, the complicity, intrigue, avarice and ethical aberration cross all limits. The CPD has suggested foreign-funded budgetary support. Well, before this it is necessary to ensure that fund received from multilateral financial institutions will see proper use, particularly in the priority areas of production and employment. If the business sharks are left any leeway of making a mockery of the market, no other efforts can ensure rational distribution of wealth and containment of inflation.