It is very difficult to find any logic behind the government's sudden decision to hike fuel prices, especially since global oil prices are starting to come down - this week, US oil prices fell below USD 90 per barrel, from USD 120 just two months ago. The government justified its decision by referring to previous global price hikes, as a result of which Bangladesh Petroleum Corporation (BPC) incurred losses amounting to around Tk 8,000 crore. However, it should be remembered that when the price of oil was globally low in the past, prices in Bangladesh were not reduced. At the time, the government saved a sizeable fund from profits earned - around Tk 47,000 crore over a few years. Why, then, did the government not adjust this gap with the funds it has saved up from previous profits, which exists only because the people paid more than what was necessary for the fuel they used?

Whether IMF conditionality is a reason behind this rise in prices is not something we can confirm with any certainty, but it is certainly a possibility. Whenever the IMF gives loans to countries, it almost always comes with some common conditions and a certain style of crisis management. The same straitjacket is fitted onto every country. One of the main aspects of this is an increase in the prices of utilities such as gas, electricity, oil, water, and sometimes even education and healthcare, regardless of how important the reasons are for the government to invest in these sectors, or how much of an impact price hikes might have on ordinary people. These conditionalities are imposed in the name of getting rid of fiscal deficits, but the objective is to protect different global, capitalist interests. So it is not illogical to speculate that the Bangladesh government is taking this dangerous decision due to pressure from the IMF.

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Why is Bangladesh seeking IMF support in the first place?

Before raising prices as a reaction to global changes, one must think of the consequences. In a country where inflation is already high and the prices of essentials are soaring, high oil prices are guaranteed to have a knock-on effect on almost all other goods, as well as transport costs and rent. Ordinary people have already reduced consumption, and their debts have started to pile up. Keeping this context in mind, there are a number of alternative paths the government could have chosen.

One was to use the profit the government received when they were importing oil at low prices and selling it to the people at high prices. Another alternative would have been to simply lift the duty levied on imported oil, which would have reduced prices. Also, last week, the PM shared the information that we have sufficient stock of octane and petrol in Bangladesh as by-products of gas extraction. If this is the case, then why should the volatility of the global market have any impact on us? Given that there are zero production costs when it comes to by-products, why are prices not falling instead? There are a lot of inconsistencies for which the people deserve answers.

As a long-term policy, Bangladesh also had the option of safe and cheap gas exploration for greater energy sovereignty. The deal with the US multinational corporation ConocoPhillips is an example of the state of this sector. In 2009, we objected to a contract for gas exploration and production with ConocoPhillips because it held provisions for export. We argued that we should reserve the gas extracted for our own needs, but the government argued that the need to extract gas was so urgent that no consideration could put a stop to it. Our protests were dispersed, often with violence, the contract went ahead, and ConocoPhillips' share value went up. They went on to give a sub-contract to another company, which after a while changed their minds and left. And in the last 13 years, that gas has remained unexplored.

At the time, the alternative model we suggested was a bit like the Padma Bridge one. We could work with foreign companies in the fields where we have limited expertise, but we opposed any contracts that would give them authority or ownership over our resources. We wanted to build our own national capacity, not only in terms of gas extraction, but also in terms of tapping into renewable energy sources. I believe if the government had gone down that route, then the situation in Bangladesh would be completely different right now. Instead, the government played into the hands of interest groups in favour of importing LNG, and their focus also shifted towards coal and nuclear energy. The country became dependant on imports, foreign loans and foreign companies for our energy needs, creating an unsustainable system that not only made us vulnerable but ultimately contributed to environmental destruction as well.

What happened in Sri Lanka is a warning for us. There are certain similarities between our two countries, such as taking on mega-projects without due process, loan dependency, lack of transparency in decision-making processes, monopolisation by a few groups, a lack of accountability, etc. Bangladesh's main advantages are high remittance and export earnings, which are keeping us afloat despite capital flight and widespread corruption. However, policymakers are continually failing to deal with the root causes of the crisis that we are now being faced with.

It is dangerous to be so dependant on imports when there is such high pressure on foreign exchange reserves. But what created this pressure in the first place? Capital flight, or the laundering of money abroad by influential persons, now stands at around Tk 70,000-80,000 crore, according to international estimates, although some independent analysis suggests the amount could be twice as much. Stopping or at least controlling it should have been a priority for us. Yet, in the last budget proposal, the finance minister gave a green signal to these money launderers by making a provision for legalising money laundered out of Bangladesh in exchange for only 7-15 percent tax. High-cost imports for mega-projects are also putting pressure on forex reserves. In this scenario, stopping unnecessary imports, controlling unsustainable mega-projects that operate without transparency, and controlling capital flight should be the government's main priorities.

If the government takes the IMF loan and continue in this vein, the crisis we are facing will not be resolved. Without a solution to corruption and excess and with growing privation and commercialisation, it is the people of this country who will bear the brunt of the government's wrong choices. The negative impacts will be potent for the country's huge majority including informal workers, many of whom fell further into poverty during the pandemic. This vast and extremely vulnerable population will be forced to cut household costs, which will then go on to have wider impacts on nutrition, education and health, especially for women and children. Ultimately, the government's irresponsible, illogical and unkind decision to raise fuel prices will harm people in every section of society and ultimately injure economic productivity as well.

Anu Muhammad is a professor of economics at Jahangirnagar University. This article is the result of an interview taken by a member of The Daily Star editorial team.