Reduce fuel oil prices by Tk 5 -10 per litre: CPD

Staff Reporter :
The Centre for Policy Dialogue (CPD) has recommended for raising the coordination between monetary and fiscal policy alongside ensuring institutional reforms to tame inflation and maintain stability in the financial sector.

It also urged the government to reduce fuel oil prices by Tk5 to 10 per litre.

Towfiqul Islam Khan, senior research fellow at CPD, made the recommendation on Saturday during the “Economy of Bangladesh 2022-23: Third Interim Review” event on Saturday. He said a reduction in fuel oil prices would lead to a decrease in power prices and the required budgetary subsidies.

He also highlighted that a monopoly market lacks efficiency and emphasised the need for the Bangladesh Petroleum Corporation (BPC) to supply fuel oil at competitive prices.
CPD, at the time, stressed that the mistakes made while preparing the FY2023 budget, particularly setting unrealistic targets for major macroeconomic indicators, should not be repeated in the upcoming budget.

This marks the third review by CPD on the economy for the current fiscal year, which concludes on June 30th. According to CPD, the Bangladesh economy is currently at a critical juncture and facing one of the most challenging periods in recent history.

“Given the current circumstances and in light of the upcoming national budget, there is no doubt that restoring macroeconomic stability is the primary task for policymakers,” stated Dr Fahmida Khatun, executive director of CPD while reading out the analysis findings.

The think-tank emphasised that the targets set for the macroeconomic and fiscal framework for FY2024 should be based on the prevailing realities.
While fiscal and budgetary measures are expected to be at the forefront of discussions in the coming days, CPD stressed the importance of ensuring coordination between fiscal and monetary policies by both the government and the central bank.

However, CPD said that policy measures should prioritise the interests of small and medium entrepreneurs and ordinary citizens while resisting the influence of vested interest groups.
Also, the think-tank recommended initiating and expediting reform measures in line with IMF conditionalities and national interests. It emphasised that the pacing, sequencing, and phasing of these reforms should be well-planned and transparent.

Regarding the banking industry, CPD underscored the need for a proper enforcement of laws and regulations against bank loan defaulters.
To discourage illicit financial flows and the circulation of illegally earned money, CPD recommended implementing strict administrative measures and punishments in accordance with existing laws.

CPD identified both external and internal factors that have influenced the Bangladesh economy. The external factors identified by the think-tank include the adverse impacts of the COVID-19 pandemic and the Russia-Ukraine war, which have contributed to high global commodity prices, imported inflation, and disruptions in supply chains.

Internal factors highlighted by CPD include embedded structural weaknesses, sub-optimal policies, ineffective policy implementation, poor governance, and an inability to implement necessary reforms.