Finance adviser hints at possibility of energy price readjustments
Sunday, 14 September 2008
FE Report
Finance and planning adviser Mirza Azizul Islam said Saturday there should be discussion on local oil price situation in the wake of its sharp decline in international market.
"There should be a discussion on oil price in the domestic market," said Dr Aziz on his return home at Zia International Airport after attending a climate conference in London.
The comment by the finance and planning adviser is seen by many as a hint towards readjusting oil price in the local market.
But unlike the previous occasion a downward adjustment might be made after the oil price dropped in the international market by almost 30 pre cent to at around US$ 100 a barrel recently from around $140 in June when the last upward price adjustment was effected.
Meanwhile, Dr. Aziz said, the country's economic growth in the current fiscal year is unlikely to be affected by political activities that are gradually picking up ahead of the next general election.
"Political tension or political activities whatever you may call it that is not a challenge to the economy unless it becomes a law and order problem," he said in replying to a question.
The finance adviser said the economic growth will remain on track if factors like law and order situation, business climate and communication systems remain normal.
He, however, was not sure about the economic situation of the country after the political changeover. "It's difficult to say what is going to happen in the future - whether the economic growth will be faster or slower," he added.
Dr Aziz said the future leadership should strive to maintain the present economic trend by pursuing two-prong strategy that the economic development has to be private-sector led while the private sector will not depend on the government.
And at the same time, he said, the government would have to increase social protection, if necessary.
"I hope the next government, whoever it may be, would follow the two strategies of economic development," he added.
About the energy prices, Dr Aziz, added the authorities will have to review trade deficit of the state-owned Bangladesh Petroleum Corporation (BPC) before making any decision on further oil price adjustment.
He said the BPC, the country's lone petroleum products importer and distributor, is still facing trade deficit despite increase in oil price by 33.85 to 37.5 per cent in the local market June last.
As there is hint for further decline in oil price to below $100 a barrel the finance and planning adviser said the trade 'deficit of the state-run entity might be reduced.'
"But a review is needed to get a clear picture about the actual deficit," he added.
Chief adviser's office (CAO) has already asked the ministry of finance and the energy division to make scrutiny of the charges before fixing the prices of petroleum products in local market.
"I suggest that you take the initiative to review the cost structure," said a CAO letter signed by the chief adviser.
The chief adviser wanted so after finding that state-owned BPC added some charges on imported cost while fixing the final price that had bearing on the consumers.
These charges contribute a significant amount to price-fixation and added extra burden on the general consumers, who are already hard-hit by record rise in fuel oils in the local market June last.
The point-to-point inflation in June again crossed the double digit mark at 10.04 per cent after it was recorded at 7.6 per cent in April and 7.4 in May.
Finance ministry has also taken initiative to reassess the BPC losses, which has become essential for proper utilisation of the budgetary allocation worth Tk 60.00 billion earmarked for the oil subsidy in the current fiscal.
The ministry made the budgetary allocation based on the price of crude oil at $120 per dollar, its officials said after a meeting with the energy division official on PBC losses early this month.
The finance ministry has already disbursed Tk 11.0 billion to the BPC to finance the country's oil import bill for the months of July and August.
On an average Bangladesh needs to import 85,000 barrel of refined and crude oil a day.
In the 2007-08 fiscal, the BPC spent around $3.1 billion to import 3.7 million tonnes of oil. Some 75 per cent of which is refined to diesel. The import cost was at least $1.0 billion higher than the previous year.
Besides the oil issue, Dr. Aziz focused on the UK-Bangladesh climate change conference 'saying it was successful'.
"The British government has formed a fund of 75 million pounds to help Bangladesh adapt to climate change." he said.
"The Danish government has also pledged assistance." he said.
Other donor agencies, including the World Bank, have also promised climate-change adaptation funds, the adviser added.
Finance and planning adviser Mirza Azizul Islam said Saturday there should be discussion on local oil price situation in the wake of its sharp decline in international market.
"There should be a discussion on oil price in the domestic market," said Dr Aziz on his return home at Zia International Airport after attending a climate conference in London.
The comment by the finance and planning adviser is seen by many as a hint towards readjusting oil price in the local market.
But unlike the previous occasion a downward adjustment might be made after the oil price dropped in the international market by almost 30 pre cent to at around US$ 100 a barrel recently from around $140 in June when the last upward price adjustment was effected.
Meanwhile, Dr. Aziz said, the country's economic growth in the current fiscal year is unlikely to be affected by political activities that are gradually picking up ahead of the next general election.
"Political tension or political activities whatever you may call it that is not a challenge to the economy unless it becomes a law and order problem," he said in replying to a question.
The finance adviser said the economic growth will remain on track if factors like law and order situation, business climate and communication systems remain normal.
He, however, was not sure about the economic situation of the country after the political changeover. "It's difficult to say what is going to happen in the future - whether the economic growth will be faster or slower," he added.
Dr Aziz said the future leadership should strive to maintain the present economic trend by pursuing two-prong strategy that the economic development has to be private-sector led while the private sector will not depend on the government.
And at the same time, he said, the government would have to increase social protection, if necessary.
"I hope the next government, whoever it may be, would follow the two strategies of economic development," he added.
About the energy prices, Dr Aziz, added the authorities will have to review trade deficit of the state-owned Bangladesh Petroleum Corporation (BPC) before making any decision on further oil price adjustment.
He said the BPC, the country's lone petroleum products importer and distributor, is still facing trade deficit despite increase in oil price by 33.85 to 37.5 per cent in the local market June last.
As there is hint for further decline in oil price to below $100 a barrel the finance and planning adviser said the trade 'deficit of the state-run entity might be reduced.'
"But a review is needed to get a clear picture about the actual deficit," he added.
Chief adviser's office (CAO) has already asked the ministry of finance and the energy division to make scrutiny of the charges before fixing the prices of petroleum products in local market.
"I suggest that you take the initiative to review the cost structure," said a CAO letter signed by the chief adviser.
The chief adviser wanted so after finding that state-owned BPC added some charges on imported cost while fixing the final price that had bearing on the consumers.
These charges contribute a significant amount to price-fixation and added extra burden on the general consumers, who are already hard-hit by record rise in fuel oils in the local market June last.
The point-to-point inflation in June again crossed the double digit mark at 10.04 per cent after it was recorded at 7.6 per cent in April and 7.4 in May.
Finance ministry has also taken initiative to reassess the BPC losses, which has become essential for proper utilisation of the budgetary allocation worth Tk 60.00 billion earmarked for the oil subsidy in the current fiscal.
The ministry made the budgetary allocation based on the price of crude oil at $120 per dollar, its officials said after a meeting with the energy division official on PBC losses early this month.
The finance ministry has already disbursed Tk 11.0 billion to the BPC to finance the country's oil import bill for the months of July and August.
On an average Bangladesh needs to import 85,000 barrel of refined and crude oil a day.
In the 2007-08 fiscal, the BPC spent around $3.1 billion to import 3.7 million tonnes of oil. Some 75 per cent of which is refined to diesel. The import cost was at least $1.0 billion higher than the previous year.
Besides the oil issue, Dr. Aziz focused on the UK-Bangladesh climate change conference 'saying it was successful'.
"The British government has formed a fund of 75 million pounds to help Bangladesh adapt to climate change." he said.
"The Danish government has also pledged assistance." he said.
Other donor agencies, including the World Bank, have also promised climate-change adaptation funds, the adviser added.