A brusque announcement ramping up prices of all major fuel oils has sent shockwaves through Bangladesh’s economic landscape as economists fear a severe impact on inflation like in the past.
The immediate impact of fuel-oil-price hikes on inflation used to be very severe after raising oil price as it inflates the transportation and passenger charges immediately, analysts said Monday, as the news of a flat 20-precent hike in petroleum products broke at daybreak following a midnight government announcement.
According to official data, the impact was so immediate that the month-on-month inflation rate jumped in the subsequent months of the fuel-price hikes-and even continued for years.
After taking over in February this year, the BNP-led government has already raised the fuel prices thrice-once every two months-which has already affected the country’s economy a lot.
After the oil-price hike on April 19, the point-to-point inflation rose to 9.04 per cent in April while 9.42 per cent in the following month of May from 8.71 per cent in March, Bangladesh Bureau of Statistics (BBS) data showed.
On April 19 this year, the government increased the diesel price by Tk 15 per litre, while octane, petrol, and kerosene went up by Tk 20, Tk 19, and Tk 18 respectively. Although the immediate impact of the June 2026 price hike was not seen on the Consumer Price Index (CPI) due to a nominal of Tk 5.0-per-litre price hike, but analysts feared the impact this time might be severe amid a higher-margin hike.
Similarly, the interim government across-the-board increased by Tk 1.0 per litre for all four types of fuel oils in February 2025 and by Tk 2.0 per litre in December 2025. However, its impact was tiny on the inflation due to nominal adjustment of the process.
The highest effect crippled the economy after the price hike in July 2022 when the point-to-point inflation swelled by 2.04-percentage points within a single month to 9.52 per cent in August from 7.48 per cent in July, according to the BBS data.
Effective from Monday, the retail prices for diesel jumped 17.4 per cent to Tk 135, octane to Tk 165, petrol to Tk 160, and kerosene to Tk 155.
While the Energy and Mineral Resources Division justified the move as a necessity to curb a mounting Tk 228.76-billion subsidy loss incurred by the state-run Bangladesh Petroleum Corporation (BPC) since March, economists and market experts warn that the “immediate aftermath will manifest as a sharp, unavoidable spike in inflation”.
Historically, energy-price changes in Bangladesh do not slowly trickle down; they strike consumer wallets almost instantly. In the immediate month following the hike, inflation metrics — especially non-food inflation like transport and utilities, followed closely by food inflation — are projected to rise sharply.
Within hours of the gazette notification, the immediate manifestation of the price hike was felt on the streets.
Bus fares on several Dhaka routes instantly shot up by Tk 5 to Tk 10. Because diesel powers over 90 per cent of the commercial transport sector in Bangladesh, cargo and passenger transport costs have scaled proportionally.
Analysts have said this direct surge will reflect as an instantaneous spike in the transport sub-index of the October Consumer Price Index.
The more damaging effect is the immediate “second-round” transmission into the food-supply chain.
Approximately 70 per cent of the country’s agricultural irrigation pumps run on diesel. As farmers bear an immediate 17.4-percent hike in irrigation, harvesting, and threshing costs, the production expenses for essential crops like rice will jump.
Combined with higher truck-freight rates to transport vegetables from rural hubs to Dhaka, urban consumers will face heightened food marketplace costs by early next month.
Policy Exchange, Bangladesh Chairman Dr Masrur Reaz told The Financial Express the price hike obviously would raise the inflation immediately.
“When the inflationary pressures were taming down moderately over the last few months after several measures of the government, then this hike will enlarge the CPI again. It was not a correct and time-befitting decision of the government,” he said.
Before increasing the price at huge margins, the government should be cautious about price hike on diesel as this directly and immediately impacts the logistics, agriculture and industry, the economist said.
Source: https://thefinancialexpress.com.bd/economy/inflation-relapse-feared-on-across-the-board-cost-spikes-1
