Politics of Reforms political interference

It was heartening to read the honorable Prime Minister’s explanation to the press on the need for an increase in diesel prices. It was a politically difficult decision but  the right one from the economic management point. The growing fiscal tightness owing to low tax compliance, as rightly noted by the PM, makes it fiscally unsustainable to carry on the huge and growing burden of energy subsidy. Importantly also, continued large subsidy on fossil fuel including diesel is inconsistent with Bangladesh’s commitment to reduce its own contribution to greenhouse gas emission. Even though Bangladesh is a small polluter when compared with the USA, China and other large polluters, in the spirit of being a team player all countries must also put their houses in order.

The need for diesel price adjustment emerged from rising international prices. More generally, all commodity prices are on the upswing globally. The combination of massive fiscal stimulus to fight the Covid-19 induced economic downswing and the emerging supply constraints in specific areas due to structural problems have created an unprecedented global dilemma of rising inflationary pressures amidst inadequate economic recovery.  Bangladesh is facing a similar problem of rising inflationary pressures and the need to boost GDP growth. The situation calls for deft economic management and political courage to tackle some of the bottlenecks created by the perception that these are political sacred cows.

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