Economists defend upward adjustment of fuel price
Monday, 2 January 2012
Economists have defended the upward adjustment of gasoline price by the government, saying that such a price adjustment has become imperative for taming the rising subsidy expenditures that indirectly fuel inflation, reports BSS.
They said the government has no option but to increase the fuel price because of a rise in the import cost of gasoline. They have suggested the government to closely monitor the impact of the fuel price hike at the consumer-level as it could push up production costs.
"Upward adjustment of fuel price has become necessary for the government to maintain macroeconomic stability," said Dr Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD).
Gasoline price has remained almost stable in the international market but overall import cost soared due mainly to devaluation of taka against dollar and for this reason, the government has taken this step to maintain macroeconomic stability, he said.
Mustafiz said subsidy expenditures are increasing due to rental power plants and the government is borrowing from the banking system, especially from Bangladesh Bank, to off set the subsidy. "It is also pushing up inflation," he said, adding that under this situation, the government has no alternative option rather than adjusting the fuel price.
Palli Karma Sahayak Foundation (PKSF) Chairman Dr Quazi Kholiquzzaman Ahmed said the government's subsidy expenditure has been increasing alarmingly because gasoline price has increased sharply in the international market over the last one-and-a-half year.
The government is maintaining such a huge subsidy through borrowing either from internal or external sources but it has become difficult for the government to manage fund from development partners due to global economic recession, he added.
Borrowing from banking system would indirectly fuel inflation, he said. The government should monitor that the impacts of fuel price hike on the economy, he said, adding that fuel oil price hike would not have a major impact on essential commodities because the country has adequate stock of rice.
Defending the fuel price hike by the government, former adviser of the caretaker government Dr Mirza Azizul Islam said fuel price adjustment has become a must for the government to reduce its subsidy expenditures. "The government should do it much before," he said, adding that cost for fuel import has increased sharply due to rental power plants that has also pushed up the government's subsidy, he added.
They said the government has no option but to increase the fuel price because of a rise in the import cost of gasoline. They have suggested the government to closely monitor the impact of the fuel price hike at the consumer-level as it could push up production costs.
"Upward adjustment of fuel price has become necessary for the government to maintain macroeconomic stability," said Dr Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD).
Gasoline price has remained almost stable in the international market but overall import cost soared due mainly to devaluation of taka against dollar and for this reason, the government has taken this step to maintain macroeconomic stability, he said.
Mustafiz said subsidy expenditures are increasing due to rental power plants and the government is borrowing from the banking system, especially from Bangladesh Bank, to off set the subsidy. "It is also pushing up inflation," he said, adding that under this situation, the government has no alternative option rather than adjusting the fuel price.
Palli Karma Sahayak Foundation (PKSF) Chairman Dr Quazi Kholiquzzaman Ahmed said the government's subsidy expenditure has been increasing alarmingly because gasoline price has increased sharply in the international market over the last one-and-a-half year.
The government is maintaining such a huge subsidy through borrowing either from internal or external sources but it has become difficult for the government to manage fund from development partners due to global economic recession, he added.
Borrowing from banking system would indirectly fuel inflation, he said. The government should monitor that the impacts of fuel price hike on the economy, he said, adding that fuel oil price hike would not have a major impact on essential commodities because the country has adequate stock of rice.
Defending the fuel price hike by the government, former adviser of the caretaker government Dr Mirza Azizul Islam said fuel price adjustment has become a must for the government to reduce its subsidy expenditures. "The government should do it much before," he said, adding that cost for fuel import has increased sharply due to rental power plants that has also pushed up the government's subsidy, he added.