Commerce Minister Khandakar Abdul Muktadir on Monday told Parliament that the recent increase in fuel prices in Bangladesh – triggered by the global volatility due to tensions in the Middle East – is “modest” and is unlikely to significantly accelerate inflation.
Replying to a supplementary question from independent lawmaker Rumeen Farhana (Brahmanbaria-2), he said Bangladesh’s fuel price adjustment has been carefully managed and remains moderate compared to sharp increases in many countries.
“The hike in fuel prices in Bangladesh is modest amid the tension in the Middle East. It will not significantly drive inflation,” the minister said, arguing that the impact on overall inflation, particularly food inflation, remains limited as fuel accounts for a relatively small share of production costs.
Commodity prices, supply satisfactory, says Minister Muktadir
In many countries, including the United States, fuel prices have risen sharply – in some cases from around $2.70-$2.80 per gallon to over $5 – largely due to market-driven and tax-related adjustments, he said.
Muktadir stressed that in Bangladesh, fuel price adjustments are not fully automatic and are carefully managed by the government.
Giving an example, he said even after a price increase, the additional cost spread across 10,000 kilograms of cargo carried by a truck results in only a marginal rise in per-unit transportation cost. “So, while fuel price hikes may appear significant at first glance, their direct contribution to inflationary pressure is not as substantial as commonly perceived,” he said.
The minister further said the government remains cautious to ensure that economic fundamentals do not become imbalanced. “Bangladesh has followed a measured and moderate approach in adjusting fuel prices, in line with global trends, to maintain economic stability,” he said.
He also assured the House that the government is actively monitoring inflation and will take necessary steps to keep it under control.
In reply to a starred question from ruling party lawmaker Md Shamsur Rahman Shimul Biswas (Pabna-5), the minister said the ongoing geopolitical tensions in the Middle East may have potential impacts on global economy and trade while Bangladesh is not an exception to that.
He said the Middle East is a significant trade partner for Bangladesh while the country exports ready-made garments (RMG), pharmaceuticals, frozen foods, leather and leather goods to markets such as the United Arab Emirates, Saudi Arabia, Qatar, Kuwait, and Oman.
Muktadir said the current instability could lead to rising fuel prices, increased import costs, higher shipping and insurance expenses, possible decline in exports to Middle Eastern markets, price hikes of commodities, and potential challenges in remittance inflows.
“To tackle the situation, the government has undertaken a series of measures under the directive of the Prime Minister,” he added.
These measures include diversifying export markets by expanding trade with India, Nepal, Bhutan, East Asia, and ASEAN countries, the minister said, adding that the government is also working to broaden the export basket beyond RMG to include pharmaceuticals, agro and agro-processed products, jute and jute goods, plastics, frozen foods, shrimp, ICT products, and light engineering goods.
To boost sector-based exports, he said no-objection facilities have been provided for importing raw materials on a Free of Cost (FOC) basis in shipbuilding and footwear industries. Besides, Rules of Origin (RoO) certificates are being issued online to facilitate exporters in accessing preferential market benefits.
Muktadir said Bangladesh is actively engaging in bilateral and regional trade negotiations.
He also focused on ongoing negotiations on several major trade agreements, including Bangladesh-Korea Comprehensive Economic Partnership Agreement (CEPA), Bangladesh-Singapore Free Trade Agreement (FTA) and Bangladesh-UAE CEPA.
The minister said Bangladesh has signed an Economic Partnership Agreement (EPA) with Japan, which, once ratified, will become the country’s first free trade agreement with any nation.
He added that negotiations are ongoing with several other countries to enhance trade and investment ties.
To maintain stability amid the global situation, Muktadir said the government is closely monitoring developments and remains prepared to take necessary actions to protect trade and macroeconomic stability.
He spelled out government’s sweeping austerity measures aimed at saving energy.
The minister said efforts are underway to strengthen coordination with countries such as China, Malaysia and Indonesia to ensure uninterrupted supply of essential goods.
Govt prioritises export market diversification
In reply another supplementary question from the same lawmaker, the minister said the government is continuously evaluating and reviewing its policy measures to cope with evolving global economic challenges while simultaneously taking concrete steps to mitigate their impact in the short and medium term.
He said beyond regular assessment, the government is focusing on implementing practical measures to ensure that external shocks do not exert strong pressure on the economy.
Muktadir said reducing logistics costs has been identified as a key priority. “Globally, logistics costs account for around 10 percent of GDP, whereas in our country it stands at nearly 16 percent, which is significantly high,” he said.
He added that the government is working to improve port efficiency and other logistics-related sectors to bring down these costs, expressing hope that the benefits will be visible in the near future.
Focusing export diversification efforts, the minister said initiatives have been taken to expand markets beyond conflict-affected regions. “The government is also identifying countries where duties and tariffs remain high.”
Given that around 83-84 percent of Bangladesh’s exports come from the RMG sector, he said special emphasis is being placed on reducing tariffs on these products.
Responding to a starred question from Rumeen Farhana, the minister said Bangladesh currently operates 24 commercial wings in 21 countries across the world to promote and expand exports.
The commercial wings are located in Brussels, Paris, Berlin, Madrid, Geneva, London, Moscow, Ankara, Canberra, Ottawa, Washington, Los Angeles, Beijing, Kunming, New Delhi, Kolkata, Tehran, Tokyo, Jeddah, Brasilia, Kuala Lumpur, Seoul, Singapore, and Dubai.