Originally posted in The Business Standard on 21 April 2026
Ripple effects of fuel price hike: What lies ahead
As Bangladesh faces yet another fuel price hike amidst another ongoing energy crisis and dwindling foreign reserves, TBS spoke to various experts and asked what the challenges ahead may be this time.
In 2021-22, when diesel price went up by Tk34 per litre and octane by Tk46 per litre, it sent immediate shockwaves through the economy, triggering a cascade of transport fare hikes of up to 22% for long-haul routes and 16% within cities.
The ripple effect choked ordinary citizens already battling global inflationary pressures worsened by the Russia-Ukraine war, which had disrupted fuel supply chains and driven up import costs. As Bangladesh faces yet another fuel price hike amidst another ongoing energy crisis and dwindling foreign reserves, TBS spoke to various experts and asked what the challenges ahead may be this time.
The government initially tried to absorb the shock without raising prices, drawing on the institutional surplus available to them. However, once it became clear that the situation might be prolonged and that sustained price pressures could place significant strain on the economy, they were ultimately compelled to take this step. That is how I interpret it.
Undoubtedly, this will have a multiplier effect on the economy — an adverse one. The immediate impact will be felt by those purchasing fuel directly, as prices have risen by around 15%, thereby increasing their costs. From there, the effects will cascade downstream. Fuel is widely regarded as a barometer for the prices of other commodities, so the implications extend well beyond the initial increase.
Transport costs will rise, and with them, a range of other expenses. Producers will face higher fuel costs in their operations, which will further compound due to increased transportation expenses. In agriculture, farmers will also see their costs climb, creating knock-on negative effects across the broader economy.
The extent to which this fuels inflation remains to be seen, as it will vary across sectors. Not all sectors rely on fuel to the same degree. However, since transport costs are embedded across virtually all economic activities, the impact will be felt everywhere — albeit to differing extents.
A second key factor will be how effectively the government manages related issues. For instance, ensuring that transport fares do not rise irrationally will be crucial in containing inflationary pressures.
If transport costs are adjusted in a measured and justified manner, the inflationary impact can be moderated.
Strengthening social safety net programmes will also be essential. If these are expanded, particularly to support marginalised groups, the burden can be eased. For example, widening the coverage of family card schemes could help cushion vulnerable households against rising costs.
In the short term, better management can still help ease the pressure. For instance, a 15% increase in fuel prices does not automatically justify a blanket 15% rise in bus fares. Adjustments must be grounded in a rational assessment of how much fuel contributes to total costs.
