IT is reported that the government and the World Bank (WB) are at odds over the multilateral lending agency’s prescription to introduce automated adjustment of fuel prices that could resulted in lowering fuel price in domestic market in view of its drastic fall in global market. The WB tagged the issue as a major condition for providing $500 million budget support to the government. Though the government did not get single penny as budget support after 2008, it is eying to borrow Tk 30,134 crore from the donor community during the current fiscal. In the wake of rolling back of VAT earlier imposed on private universities and English medium schools and to pay the newly announced higher salary for public servants, the government is really entrapped.
As it appears the government always raised tax and utility charges trading blames on the WB, but this time when the agency is asking to switch to automated adjustment, it is not ready mindful of the fact that it may force the government to reduce cost of fuel and electricity in tandem with the drastic fall in global fuel price.
The fuel price adjustment issue came up in discussion of Finance Minister AMA Muhith with visiting WB vice president for South Asia on Sunday. The government is in need of increased credit flows from the multilateral agency to meet the yawning budget deficits of the current fiscal. The WB has been pushing for the corporatization of the power utilities known for their chronic inefficient performance and the strengthening of the Power Development Board’s load dispatch center. But the government appears not ready to agree to those reforms as it may hit vested interest groups in the Power Sector.
In fact the automated fuel price adjustment has two-edge impact on developing countries. In most such countries the government gives subsidy for lowering fuel price bills of people buying at comparatively higher price from global market. The fuel price adjustment with international market would be helpful for ordinary people only when the domestic price is higher than the global market. It would then lower commodity prices and encourage investors to open new businesses. This is what the situation now and it appears that the government is not agreeable to it as it continues to ignore demands by people to reduce the cost of fuel and the utilities that fuel generates.
It is really a complex issue whether the government will follow the WB prescription or not as the agency’s policies are not necessarily helpful for third world countries. But as far as the WB soft loan is now badly needed by the government to feed the lavish new pay scale of government employee; which it find important to continue in power, in our view the government may also agree to automated fuel price adjustment that may bring relief to the common people and businesses at the moment.
