Discard plan to hike prices of electricity, gas and fertiliser

The meeting of the coordination council on fiscal, monetary, and currency exchange, held on Wednesday decided to increase prices of electricity, gas, and fertilizer to rein in the soaring budget deficit is a disturbing development for the yet-to-recover economy. Finance Minister AHM Mustafa Kamal presided over the meeting, as reported by different media outlets, including The Business post. Top officials of the ministry of finance, the National Board of Revenue, the Economic Relations Division, and the central bank attended the meeting.

According to sources, quoted by the dailies, the meeting viewed that subsidy for electricity, gas, and fertilizer for public consumption has been mounting, and unless the prices are adjusted immediately, the volume of subsidy will become unaffordable.

It is to be noted that businesses already battered by the onslaught of prolonged coronavirus are not in a position to bear any extra burden of a fresh hike in utility bills. Almost all segments of the population, including the business community, have faced a sudden blow following the recent price hike of diesel. Commoners, fixed income groups, and small businesses bear the brunt the most. To lessen the budgetary subsidy, any abrupt price hike of electricity, gas, and fertilizer will be a double whammy for businesses, and common people alike.

The projected budget deficit of Tk2,14,681 crore, which is 6.2 per cent of the current fiscal year’s GDP, is practical amid the slowing economy caused by the pandemic. To rein in the deficit financing, the government can put on hold the recruitment, cancel yearly increments of public servants for one year, and discard some development projects. Increasing further financial liability for people would not bring any positive outcome for the economy. The meeting also discussed the price hike of these items and their impact on inflation. The meeting was told that the price hike would have some immediate impact on inflation but will taper out gradually. Hence, we want to state that the very perception is an unrealistic proposition as far as policymakers of the government, and senior officials are concerned. There is no way of tempering out the burden and price pressures unless the economy rebounds strongly and income growth of mass people takes place. The extra financial burden will sandwich the commoners further, and the bank liability of businesses will soar. There is no quick fix to offset extra liability and extra expenses.

The November 3 diesel price hike caused an unbearable burden with its cascading effects – from irrigation cost to transportation of commodities, all shot up and eventually passed on to consumers. The dent in the consumer’s wallets caused by the hike in kerosene and diesel prices came at a time when most people were already struggling with rising commodity prices. To tackle the plight caused by the pandemic, Bangladesh Bank rightly intervened and extended over Tk one lakh crore in bailout programmes to rescue the business and economy. However, no fiscal and monetary attempts were taken to shield the plight of the common people. One after another price hikes of essentials, transport fares, and agriculture produces already made life miserable.

The fiscal coordination meeting forecast the next year’s revenue income, public expenditure, and economic expansion in 2022-2023. We feel good that the outlook seems rosy for the upcoming fiscal year. But all fiscal plans by the government are bound to face a debacle if industries and, service sector face extra financial burden due to recurrent price hikes of electricity, gas, and fertiliser.

The economic growth of a country is the combined contribution of people from all walks of life. If life is choked by an abrupt fiscal decision of the government, targets for growth will stumble. Without a long-term strategic reform plan within the government to yield sustained income growth, policymakers cannot simply come out of easy macroeconomic solutions like hasty price hike decisions.