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Inflation to soar on fuel price hike

Analysts term the decision untimely

Md Fazlur Rahman
Local economists and analysts say that the government's untimely decision to increase fuel prices would accelerate the already high inflation and hurt the poor even more.
Their comments came days after the government increased prices of imported
fuel and CNG, and reset the transport fares to shed some subsidy burden.
Former caretaker government adviser Akbar Ali Khan said the inflation would go up substantially due to the fuel price hike as transport costs affect all parts of the economy.
“Firstly, the prices of goods will go up
due to rise m transport costs. Secondly, it will affect farmers if the government does not increase their subsidies. Thirdly, the lives of the rural people, who do not have access to electricity, will be more difficult due to rise in kerosene price.
“It will harm the poor and push the inflation rate up.This will create a bad situation as the price rise came at a time when inflation is at 11 percent," he said.
Akbar said three things are contributing to high inflation but the government is doing nothing about them. “Prices of goods and commodities are high in the international market. The taka is depreciating against the dollar. Besides, the government has increased its spending."
Under these circumstances, if another reason is added to inflation, it will accelerate. So, there is a question of timing too, he said, adding, “We have increased the fuel prices during the worst time. We are just adding more fuel to the fire."
Mirza AB Azizul Islam, another caretaker government adviser, said the inflation would obviously increase due to the rise in fuel prices.
“I fear a vicious cycle. If prices of goods and products increase, the garment workers may demand that their living cost has gone up, so their wages should go up. As a result, the production cost at factories will go up if wages are increased.
“The government has to try to avoid this vicious cycle," he said.
He said the government had no other alternative but to increase the prices of fuel. However, he thinks the timing has been very poor.
Mahabub Hossain, executive director of Brae, said the fare of diesel-run buses
should not have been increased more than 3 percent and fares of CNG-run buses not more than 2 percent.
“The problem is that the fares could go up more, as some businessmen will exploit the opportunity to increase the fares and make more profit. Here, the government needs to monitor the implementation.”
The agro-economist said the cost of irrigation in the boro season would also go up due to rise in fuel prices. Irrigation accounts for 20 percent of the total production cost. Of the amount, diesel cost is 10 percent. As a result, the profit of farmers will shrink.
He said increasing the prices of fuel was a political decision this time.