The Bangladesh Journal - Bangladeshi poor to suffer fuel price hike

The living condition of the country’s poor people may be seriously affected owing to the recent price hike of fuel oils by the government, according to Bangladesh Bank.

“In terms of the well-being of the poor, whose livelihood is dependent on the use of kerosene and diesel, the toll is likely to be significant unless alleviated through targeted means of transfers, preferably in cash,” says Bangladesh Bank in a quarterly economic update that was released yesterday.

In its quarterly, the central bank also predicts that in spite of a decline in agricultural output, overall FY07 output growth is still likely to be close to 6.6 per cent.

Assessing the overall economy of the country, the Bangladesh Bank Quarterly for October-December 2006, says that that the uncertain political environment and the accompanying transport and other logistical disruptions impacted on the overall economic activities during the second quarter of FY07 (October-December 2006). While aus and aman production appear both below last year’s levels and current target, broader data on inputs (e.g. credit disbursement and remittances) and output indicators (e.g. crop estimates and index of manufacturing production) points to sustained overall growth. Nevertheless, a small downward correction of the overall growth potential for FY07 is called for mainly on account of agriculture.

Manufacturing sector, led by exports, appears to show similar overall growth as last year’s.

The service sector, accounting for just over 50 per cent of GDP, is also believed to have maintained its growth momentum during the second quarter of FY07 as reflected in various indirect parameters.

“While the October issue of Monetary Policy Review had projected FY07 growth rate to lie in the 6.6 to 7.1 per cent range, the reduced rice yield suggests that agricultural growth will fall below its predicted range. No significant adjustment appears necessary for the industrial or service sectors. The overall output growth for FY07 will thus likely to be close to the bottom of the range earlier predicted,” the Bangladesh Bank says.

The quarterly also observes that among recent reform measures adopted by the interim government, the anti-money laundering and anti-corruption drive (with both Bangladesh Bank and National Board of Revenue collaboration) as well as the NBR drive to expand the pool of eligible taxpayers are expected to yield positive results in terms of revenue gains for the government as well as with NCB (Nationalised Commercial Banks) solvency via faster recovery of classified loans.

However, the impact of longer term reforms, such as restructuring of SOEs, NCB corporatization and related steps (e.g. NCB and SOE management changes) is likely to lead to greater financial sector stability down the road.