The higher oil prices have posed major risks to the country's macroeconomic management and the balance of payments, observed Asian Development Bank (ADB) in its quarterly economic update released at a press conference yesterday.

The report said though the subsidised retail oil prices in the domestic market has limited the direct inflationary effects of the global oil price hike, the latter did increase the import costs significantly.

The import costs also have risen also due to a persistent depreciation of taka, about 5 percent during December 2004 to June 2005. The ADB said the exchange rate of dollar against taka experienced increased pressures and volatility due mainly a rapid growth in imports relative to export growth, aided by a sharp rise in private sector credit.

According to its estimate, oil import bills in FY2005 increased by 54 percent over the previous fiscal year. The extra cost of around $550 million depleted the foreign exchange available for other essential imports and put pressures on reserves and the exchange rate.

The higher import price of oil, together with the administered retail prices, has threatened the viability of the state-owned Bangladesh Petroleum Corporation (BPC). Over the last one year, domestic prices of oil products have increased by 9-30 percent, but in terms of dollar, the increase was only 2-21 percent, resulting in a loss of around $445 million to the BPC in FY2005.

The higher prices of imported goods, rapid depreciation of taka and a food price hike have fuelled the inflation, shooting it from 5.7 percent in July 2004 to 6.9 percent in May 2005 on a point-to-point basis, the outlook explained.