Fuel crisis adds pressure on economy, exposes policy gaps: Debapriya Bhattacharya

The ongoing fuel crisis is putting additional pressure on Bangladesh's macroeconomy and highlighting limitations in the policy framework, said Dr Debapriya Bhattacharya, Distinguished Fellow of the Centre for Policy Dialogue (CPD).

Speaking at a dialogue titled 'Thoughts on the New Government's First Budget' at the CPD office in Dhanmondi, Dhaka, on Tuesday, March 31, he said the crisis is simultaneously impacting revenue, the external sector and monetary policy. This is putting economic stability and long-term growth at risk.

He noted that a mismatch has emerged between the massive subsidies in the power sector and the conditions set by the International Monetary Fund (IMF). Additionally, high fuel prices could lead to an additional import cost of approximately $4.8 billion annually, putting pressure on foreign exchange reserves and creating risks of currency depreciation.

Debapriya Bhattacharya further stated that certain provisions in the US-Bangladesh trade agreement have created restrictions on importing fuel from cheaper sources, reducing the country's purchasing power amid global market volatility.

He cautioned that the government is facing tough policy decisions to tackle the fuel crisis—maintaining revenue on one hand while reducing pressure on consumers on the other.

Furthermore, uncertainty and rising costs in the energy sector have led to a decline in private investment, which is concerning for future economic growth.

He stressed the need for effective policies that coordinate fiscal discipline, external balance and inflation control to manage the situation; otherwise, the crisis could deepen further.