The financial quagmire: No remedy in sight

The way inflation has gripped our economy one can easily picture a time in future when people will go to markets with sacks full of money and on their way back home they will carry kitchen items in their pockets. I can see no respite from this inflationary pressure for the foreseeable future. The situation is turning from bad to worse and where it will lead the country finally is apparently beyond anyone’s imagination.

The dismal picture is going to exacerbate very soon with the government planning to hike wholesale and retail electricity prices again. The reason for price hike of electricity again after the price hikes of oil barely three months back is difficult to comprehend.

On August 05 the government hiked fuel price by 51.7 percent. It was unprecedented in the history of the country. And everyone knows how it has affected life and how it has reduced buying capacity of people, especially people with limited incomes. Interestingly when the oil price was hiked the government cited rising oil prices in the global market because of Russia-Ukraine war as the reason. But ironically in Bangladesh fuel price was raised at a time when globally oil price declined considerably.

In June, scarcely two months before the fuel oil price was hiked on August 05, crude oil price soared to $121 per barrel. But the next month i.e. in August it came down to $88 per barrel. At the end of September it came down further to $82 a barrel, according to Oilprice.com data. But the government didn’t go for adjusting the prices rather it has already reportedly decided to increase the wholesale and retail electricity prices.

According to media reports, most of the state-run power and energy companies pocketed huge profit during the time period between July and September. Ironically the time period when globally oil price came down the prices of fuel were hiked in our country. In our country prices rarely if ever go down once they go up under the excuse of hikes in the international market. May be once or twice, I can’t exactly remember, it has happened. It doesn’t happen as the state-run companies are counting loss but very often it is done to offset the money gone into the pockets of corrupt people.

The listed power and energy companies in their financial reports showed the profit made during the above-mentioned period. Of the six power and energy companies four made handsome profits in the first quarter of this financial year. The state-run electricity supplier Dhaka Electric Supply Company (DESCO) doubled its profit. As per its financial report, it secured a profit of Tk 11.50 crore. Jamuna Oil Company logged a profit of Tk 66 crore, Meghna Petroleum Tk 94 crore, Padma Oil Company Tk 68 crore while only the Titas Gas and Power Grid Company had a lower profit.

If the listed state-owned companies are not loss-making organizations then in whose interest is the government planning to raise power price now? We know how the money goes to the government coffer but we don’t know how that money goes out of the coffer and to whom. People are already overwhelmed by the burden of price hikes of daily essential items. If the fresh decision is carried out it will be incredibly difficult for them to even survive let alone the other four basic rights to education, clothing, healthcare and housing. People have to be forced to live a life of rat in rat holes.

Bangladesh Energy Regulatory Commission (BERC) has already disclosed it to media that the new bulk electricity price might be announced during the current week. Accordingly the Power Division has instructed the Rural Electrification Board (REB) to place their power price hike proposal to it. The hike of power price at this time of economic downturn is undoubtedly an unrealistic step.

There has been a widespread speculation about some sorts of subsidy cuts to come since the IMF left the country on 09 November after its 10-member team’s visit to the country for 15 days. The IMF team came to Bangladesh mainly to discuss the $4.5 billion loan Bangladesh sought back in August to protect its crumbling economy. Very naturally they set some conditions for Bangladesh to follow before they granted the loan.

Usually there are always two types of conditions the IMF set for the loan receiving country. Some reformative measures they suggest that always sound perfect. Apparently these types of suggestions are given mainly to bring discipline in the economic sectors while the others come like a bitter pill to swallow for common people. But they are to swallow it however unpleasant it may be. Those advices or suggestions are all about subsidy cuts that people have to bear in the long run.

The IMF never minds if a country doesn’t follow the first set of conditions to follow as it, according to it, will monitor exchange rates and bring discipline in the economic structure. But it never allows the loan receiver country to violate the second type of conditions that will finally ensure the loan repayment capability of the loan receiver country. Among the second set of conditions subsidy cut in public sectors get priority over the others. It means that when subsidy is removed people have to pay more and when they pay more the government’s treasury swells and people’s pockets are punctured.

Many people are keeping their fingers crossed hoping that after the sanction of the loan everything will go in the right direction. But I see little hope in that the country is already mired in debt burden and more loans mean more burdens. The time is coming very soon when its financial ability to repay loans will be stretched to its limit. If the solution can’t be found in domestic resources the economy might come crumbling down sooner or later.

The writer is a journalist. He can be contacted at [email protected]