The Bangladesh government has announced a sudden surge in the country’s fuel price, triggering discontent and outrage among the general people. The country’s measure is in the face of pressing economic conditions, which compelled the government to ease pressures from its shrinking fiscal space. While the move has ignited controversy and feeds off discontent, the policy is evidently in the interest of the country in the long term. As the country grapples with dwindling foreign reserves and mounting liabilities, the measure will avert future economic crises, albeit it raises transitory mass discontent. However, Bangladesh’s deft economic management, which underpinned the country’s commendable economic stardom, is steeped in economic realism and hasn’t succumbed to tantalizing populist nostrums.
The Current Crisis
The fuel price in Bangladesh has soared approximately 50%, in an attempt to ease the exacting burden of subsidies, as the country is grappling with subsidy management, in the face of mounting commodity prices in the global market and a multitude of other global crises. The move is poised to ratchet up inflation in the country, stoking general discontentment and dissatisfaction.
Bangladesh has been one of the vibrant economies of South Asia, the country registered laudable economic growth in past years, underpinned by prudent fiscal and monetary policies. However, a series of global crises have dented the global economic outlook, thus undermining the country’s implacable economic march. Besides, the soaring energy and food prices induced by the Russia-Ukraine war had skyrocketed the import bills, compelling the country to scour for global finance to sustain the viability of long-term economic prospects.
In a statement, the power, energy, and mineral resource ministry asserted that the prices of Petrol had ballooned to 130 takas spurred by a 51.2% surge in price, while prices of gasoline had soared to 134 takas reflecting a 51.7% rise in the previous prices.
The ministry maintained that the fuel price hike was inevitable in line with upheavals in the global market, on the ground that the state-patronized Bangladesh Petroleum Corporation (BPC) has endured approximately $85 million in losses in the preceding six months. Hence, subsidizing the energy prices for a prolonged period, will take a toll on the fiscal viability of the country, and might ensue longer-term challenges.
Prudent Fiscal Management
Bangladesh’s prolonged growth dynamics have been underpinned by the country’s realistic and prudent fiscal management, whereby the authorities evaded any populist economic policy, to appease the general people, at the cost of economic realism. The world economy is conspicuously reeling under unprecedented distress, and as a country that is an essential part of the critical global supply chain. Bangladesh hasn’t remained immune to the upheavals of the global economy. However, the country’s success lies in the proactive and prudent appraisal of the economic issues, and supplementing efforts with realistic economic policy, overlooking the ramifications on public opinion.
Due to the series of global economic crises, from the paralyzing Covid-19 to the Ukraine-Russia war, the global economy has stagnated. Since much of Bangladesh’s export earnings hinges on the apparel sector, which in turn relies on the demand on the Western market, thus Bangladesh’s export growth has remained anemic during the crisis period, reflecting the global crisis. However, the government has undertaken adequate measures in sustaining the economy of the country, through a mix of recurring stimulus packages and generous subsidies. However, in the context of escalating strain on Bangladesh and the shrinking fiscal room due to mounting debt-servicing bills, the country has undertaken the right decision to retract subsidies from the oil sector.
Prudence Overrides Populism
While other third-world countries had succumbed to a populist predilection to pacify people at the cost of economic compulsions, Bangladesh had remained firm in its realistic economic policy, even as the policy will bode ill for the public opinion in the country, fomenting mass discontent and outrage. This has been seized by some vested quarters as they deliberately foment public outrage to squeeze the policy autonomy of the government.
Spurred by spurious representation and flawed economic arguments, this analysis is indicative of economic folly, as the merchant of doom incessantly peddles gloomy economic theories, which have been repeatedly negated by the government’s unrivaled economic success, as Bangladesh has cemented itself as one of the surging and resilient economies of South Asia.
This is more so evident when some quarters had projected bleak crumbling of the economy, as the government was battered by Covid-19 induced economic crisis. However, the positive growth of the country’s economy, even amidst the grueling economic times, attests to the prudence and deft management of the country’s economy.
Moreover, while the sudden soaring of fuel prices has triggered considerable mass discontent, proactive measures by the government will safeguard the economy in the long term. The economic predicament in Sri Lanka has been occasioned by a slew of interlocking crises, where the sluggish and foolhardy government actions hastened the crumbling of the economy. In this context, while any parallel between Bangladesh and Sri Lanka is outright misplaced, nonetheless Bangladesh is bracing itself with utmost prudence to cushion the economy in times of pervading crisis.
[Photo by Santeri Viinamäki, via Wikimedia Commons]
*Kazi Asszad Hossan is a Researcher at Central Foundation of International and Strategic Studies (CFISS). The views and opinions expressed in this article are those of the author.