Lower inflation, oil price cut should benefit public
Thursday, 25 December 2008
THE fall in the prices of fuel oil, food and every other kind of consumer and capital goods in the international market have left its impact on the Bangladesh economy pulling the rate of inflation down to 6.12 per cent in November last on a point-to-point basis. Both the rates of inflation of food and non-food items have contributed to the overall downward trend in the inflation rate here. Internationally, the price of fuel oil is a big driver of inflation, which has come down drastically in the recent months in the wake of deepening recessionary pressure in the international market. Oil price, which went as high as US$147 per barrel in the international market in July 2007, has dipped to about US$40 per barrel. In response to this steep fall in the fuel oil prices in the international market, the government has also lowered the prices of petroleum products ranging between Tk 2.0 and Tk 4.0 per litre, a step that has come into effect since the midnight of last Monday. It may be noted here that the government in a similar move slashed the prices of petroleum products between Tk 7 and Tk 10 per litre last October. Such adjustment of the domestic oil prices by the government in response to the international market has also contributed to lowering of inflation in the country.
Apart from other benefits, the cut in oil price will be of especial help for the farmers in this time of the year when they will have to buy diesel to run their irrigation pumps. Lowered oil price in the market along with the government's diesel subsidy for the farmers will help keep the cost of production down in agriculture. And that will, hopefully, leave its positive impact on the future trend of inflation in the economy. Meanwhile, the central bank of the country, too, has taken contractionary measures to contain inflation by squeezing money supply in the market. In fact, both the international market situation and the central bank's monetary policy have helped to arrest the upward inflationary pressure in the economy, which was 11.21 per cent in November last year. According to experts, the falling trend of inflation may sustain unless there is any adverse impact from any vital sector of the economy such as food production. On this score, mention may be made here of boro, the cultivation of which has just started. If everything goes well with this highest contributor to the cereals basket of the country, the food factor will not be able to leave its negative impact on inflation.
The benefits of reduced oil price, downward trend in the inflationary pressure and raging recession in the developed world have not, however, always come up with the goods for the hapless public here in Bangladesh. For example, reduced fuel oil price has not been reflected in the cost of transport, for, by price adjustment, its operators mean only another opportunity for effecting a raise in the transport fares. Such irrational behaviour on the part of the transport operators was again evident from their flouting of the government order to decrease transport fares corresponding to the cut in oil price in October last. This is a serious case of anomaly in the price adjustment regime in Bangladesh market. The government should see to it that the transport and other players in the market are not able to deprive the public of the due benefits that are derivable from the general fall in the market price.
Apart from other benefits, the cut in oil price will be of especial help for the farmers in this time of the year when they will have to buy diesel to run their irrigation pumps. Lowered oil price in the market along with the government's diesel subsidy for the farmers will help keep the cost of production down in agriculture. And that will, hopefully, leave its positive impact on the future trend of inflation in the economy. Meanwhile, the central bank of the country, too, has taken contractionary measures to contain inflation by squeezing money supply in the market. In fact, both the international market situation and the central bank's monetary policy have helped to arrest the upward inflationary pressure in the economy, which was 11.21 per cent in November last year. According to experts, the falling trend of inflation may sustain unless there is any adverse impact from any vital sector of the economy such as food production. On this score, mention may be made here of boro, the cultivation of which has just started. If everything goes well with this highest contributor to the cereals basket of the country, the food factor will not be able to leave its negative impact on inflation.
The benefits of reduced oil price, downward trend in the inflationary pressure and raging recession in the developed world have not, however, always come up with the goods for the hapless public here in Bangladesh. For example, reduced fuel oil price has not been reflected in the cost of transport, for, by price adjustment, its operators mean only another opportunity for effecting a raise in the transport fares. Such irrational behaviour on the part of the transport operators was again evident from their flouting of the government order to decrease transport fares corresponding to the cut in oil price in October last. This is a serious case of anomaly in the price adjustment regime in Bangladesh market. The government should see to it that the transport and other players in the market are not able to deprive the public of the due benefits that are derivable from the general fall in the market price.