Chief Economist of Bangladesh Bank Biru Paksha Paul has suggested reducing fuel prices in line with global rates to boost investment in the country.
However, Prime Minister’s Adviser on Energy issues Tawfiq-e-Elahi Chowdhury has disagreed saying fuel-price parity will have no impact on domestic investment.
They were speaking at a discussion titled “States of the Economy” organised by the Board of Investment on Tuesday.
Biru Paksha Paul argued that the biggest challenge for enhancing investment is the interest rates on loans.
“If BPC brings down the fuel prices at par with international rates then it will reduce inflation and that will boost investment,” Paul claimed.
“Inflation is the foundation of interest rates. Interest rates on deposits can be slashed only if inflation is brought down. Once that is done, even interest on loans will come down. That will boost investment.”
For the recent slide in credit growth to private sector, he said, “The banking sector witnessed major scams forcing Bangladesh Bank to increase monitoring. Even banks have become alert. This has slowed down the credit growth. But the quality of loans has improved. Disbursement of loans for SMEs has increased. This is why economic growth has remained unaffected.”
Countering Paul’s contention, Chowdhury said he did not subscribe to the view that investment would increase if the fuel prices were slashed.
“Biru Paksha Paul has said that. But he could not substantiate it with examples. Even I am not sure what impact it will have on inflation,” Chowdhury said.
“It can’t also be said with certainty that the fare of buses and trucks will come down. Maybe it will be if the government compels. But when oil prices are increased by Tk 1, they increase the fare by Tk 10.”
Claiming that fuel prices in Bangladesh were stable, the prime minister’s advisor said, “All these years BPC incurred a loss of Tk 240 billion. Government provided the money to keep the market stable.”
Criticising economists, Chowdhury said, “The economists try to explain Bangladesh’s recent progress with growth. They say growth will be 7 or 8 percent. I say it is a totally wrong concept.”
Stating that “Bangladesh is progressing” because of the “dynamic leadership” of Prime Minister Sheikh Hasina, he said, “Whose brainchild is this financial inclusion that you are talking about today?”
“You should know who thought of a bank account with Tk 10 deposit and why. Sheikh Hasina thought of such an account to give social security.”
“No economist could predict in 2009 that there would be an investment of $8-9 billion in the power sector in Bangladesh. But Sheikh Hasina encouraged the sector to move forward.”
Executive Chairman, Board of Investment S A Samad too criticised Biru Paksha Paul.
“Bangladesh has the easiest investment procedures in this entire region. But you are suggesting that FDI rules should be simplified further.
“You have to remember under which umbrella you are working. We are working under a parliamentary democratic form of government. No one can function here without a government. But the problem with the economists is they have a one-track mind.”
During the question-answer session, Chairman of the Bangladesh Energy regulatory Commission A R Khan wanted to know what the impact on fairs in India due to the oil price cut was and which sectors would be impacted if oil prices were trimmed in Bangladesh.
In his reply Biru Paksha Paul said, “It’s a contentious issue. One should not think of it in terms of plane fair or ship fair. The government may have to interfere to bring down bus and truck fares.”