Cut in oil prices raises hope of positive effects on economy

Economists and businessmen hope the latest cut in fuel prices will have a positive effect on the economy.

Abdur Rahim Badalbdnews24.com
Published : 24 April 2016, 07:00 PM
Updated : 24 April 2016, 07:08 PM

Also Read: Fuel prices drop

Satisfied with the government move, they have predicted a higher GDP growth, a fall in inflation, lower bank interest rates and an influx in foreign investment alongside local ones.

But they also urged further reduction of diesel prices, which saw a Tk 3 per litre fall in the Sunday afternoon order, which will come into effect from midnight.

Kerosene prices also fell by Tk 3 while every litre of petrol and octane would cost Tk 10 less.

On Mar 31, the price of furnace oil was also reduced by Tk 18 per litre.

Fuel oil prices in Bangladesh were raised for the last time in 2013 due to a global hike in the prices.

Octane had been selling at Tk 99 per litre, petrol at Tk 96, kerosene and diesel at Tk 68 a litre and furnace oil at Tk 60 since then, until the latest cuts.

In his immediate reaction, apex business body FBCCI President Abdul Matlub Ahmad told bdnews24.com, “We’ve been asking for this for a long time. We’re happy that the government has finally answered our call, albeit a little late.”

“This will reduce production and transport costs. The cut in diesel price will decrease transport costs by at least 5 percent. Apart from an increase in both local and foreign investments, the number of jobs will also rise.”

Every sector in the country is related to the fuel oil prices, he said. “Inflation will drop, as will bank interest rates.”

Ahmad referred to the construction project to the Padma bridge as an example. “The oil price cut will also play a role in reducing this project’s cost.”

The business leader said the diesel price should drop more. “Only reducing the oil prices won’t work. It will have to be checked whether the move is having a positive effect on the people.”

“As business leaders, we also have a responsibility. We could have directed the transport owners to bring down transport costs if the diesel price had been lowered further,” Ahmad added.

Centre for Policy Dialogue (CPD) Executive Director Mustafizur Rahman told bdnews24.com that the latest fall on prices will have a total positive effect on producers, consumers and economic growth.

He said in a report on Jan 3 they had advocated for a 10 percent cut in oil prices by listing all possible effects on the economy.

The list included an increase in GDP growth by 0.3 percent, in readymade garment exports by 0.4 percent, in consumers’ demand by 0.6 percent and a decrease in inflation by 0.2 percent.

However, government savings will go down by 0.4 percent, the report predicted.

“The government has brought down the prices by roughly 10 percent. We’ll now have to see how it reflects on the economy. The government will have to keep an eye on that,” the economist said.

Rahman echoed Abdul Matlub Ahmad’s call to the government to ensure that the people were actually benefitting from the move.