"Many countries have adjusted their oil prices a long time now. It is our mistake not to have done the adjustment, which should have been done long ago," Finance Minister M Saifur Rahman yesterday told the press. "Buying at Tk 60 and selling at Tk 40 -- the country simply cannot run this way," he remarked.

A finance ministry source said, due to the huge gap between import and domestic fuel prices, the state oil agency, Bangladesh Petroleum Corporation, has amassed an enormous debt burden to the tune of Tk 10,000 crore.

He said, "If the price adjustment is not made, the debt amount will grow by some Tk 3,000 crore a year. So, the government has only two options -- raising the domestic oil prices or subsidising the domestic market using the national budget."

In its July-September 2005 quarterly report released Monday, the central bank, too, has recommended further adjustment of oil prices and continuing the tight monetary policy to ease pressure on the balance of payments.

A review mission of the International Monetary Fund that visited Bangladesh in November to discuss the PRGF loan put pressure on the government to go for another upward adjustment of domestic oil prices with the global ones.

Besides the oil-price adjustment, the government also has to further tighten its monetary policy and meet some other conditions to get the $75 million fifth PRGF tranche from the IMF, finance ministry sources said.

They said the price hike is expected to come before the IMF board meeting next month with approval of the PRGF instalment on its agenda.

Oil prices rose above $69 a barrel in Asian trade last Monday, which even King Abdullah of Saudi Arabia, the biggest crude oil-producing country in the Opec, considers too high and damaging to the developing economies.

"From our perspective, I personally feel that the current price of oil is too high," AFP quoted him as telling the NDTV of India telecast Monday. "The price is damaging to developing countries who subsequently have to suffer," Abdullah noted.

Talking to reporters at his Secretariat office yesterday noon Saifur agreed with the Bangladesh Bank's recommendation for raising oil prices, because, he said, "They [Bangladesh Bank] know we spend dollars to import oil, we buy at Tk 60 and sell at Tk 40."

The minister argued, "No oil supplier reduces the price for the sake of Bangladesh. Bangladesh has to buy oil at the same price as Kuwait, India or the UK. So, if oil price is Tk 60 in India, it should be the same in Bangladesh."

He also pointed out that oil prices are adjusted on a daily basis in most of the world. "In Pakistan it is done on a daily basis and weekly in India," he said, quipping, "But, people here are in too much comfort and expect the price to be adjusted periodically."

According to some economists, if the oil prices go up and the tight monetary policy continues the targeted 7 percent GDP growth cannot be achieved. But Saifur dismissed the view. "There will be no problem," he said, claiming, "We follow a monetary policy that is consistent with growth."

In his words, "Tight monetary policy is necessary, so is growth. So, we will coordinate the two."

Explaining the necessity of further oil-price adjustments, IMF Asia and Pacific Department Adviser Thomas Rumbaugh told a wrap-up press conference of the PRGF situation review in November that the whole world is doing it and Bangladesh too needs to adjust. "At the current domestic prices, the state-owned enterprises like the BPC are losing money and eventually require the government to step in and make up their losses," he pointed out, adding such a huge subsidisation cannot be sustained.

"We have discussed this with the government and there is no disagreement. The government knows there is a need for further adjustments at some point," the IMF adviser said. However, he noted, the government was in the best position to decide the timing.

Rumbaugh also said, if the government continues to tighten the macroeconomic policies to reduce inflationary pressures and speeds up reforms at the NCBs and the National Bureau of Revenue, the IMF executive board may discuss the fourth review under the PRGF in early 2006.

The last fuel price hike was made in the first week of September 2005, raising the price of one litre of octane by 18 percent to Tk 45, petrol by 17 percent to Tk 42, and diesel and kerosene by 15 percent to Tk 30.

Since coming to office in October 2001, the coalition government has raised fuel prices on eight occasions. In December 2001, petrol sold at Tk 28 per litre, and diesel and kerosene at Tk 17.