Eminent economist and Chairman and Founder of Policy Exchange Bangladesh Dr M Masrur Reaz predicts the fresh gas-price hike will create two challenges for an already- struggling economy.
On external-sector front exporters are dealing with a recession-hit European market with bleak chances for price or margin escalation, he pointed out.
Besides, the competitiveness of Bangladeshi products will be undermined due to higher production cost.
Secondly, for the domestic market, firms, particularly the small and medium ones which have been dealing with rising cost of business due to higher wage pressure, logistics and raw material cost, will now incur further escalation in cost of doing business, according to Dr Masrur.
"This (the hike) may exacerbate the inflationary pressure as many firms will pass on the additional costs to the consumers," he told the FE.
Moreover, it will be paramount that government ensures uninterrupted supply of gas without which economic output will dwindle, the economist said.
"It will be also prudent to identify options where government may offer fiscal and regulatory relief which may help reduce the burden on businesses," he suggests.
Dr Masrur says it is understandable that gas price has been in need for some upward revision as large subsidies are no longer viable.
However, the increase should have been made more targeted, he opined.
Citing example, Dr Masrur said the rate has been increased to Tk 30 per unit indiscriminately for large, medium and small businesses.
According to him the burden of increase should have been lower for small businesses and perhaps in the short term for high-priority export sectors as these sectors make effort to manage recession in destination markets.
For the large and medium businesses, the approach could have taken a more incremental with a gradual increase instead of a steep increase.
He, however, suggests that the government has to closely watch the impact the gas price increase will have on electricity-production costs as the generation uses gas as primary fuel.
The decision not to increase gas price for transport sector and household usage is a welcome step for efforts to contain inflation, he says.
