Without oil price risk management, Bangladesh’s foreign currency reserves will decrease, currency instability will increase and the external debt burden will haunt the economy
Crude oil holds strategic importance for all nations, especially for economies reliant on crude oil imports. The world has witnessed various events, such as the Iraq, Yemen and Ukraine-Russia wars, which have introduced risks for oil-importing nations, resulting in higher oil prices. The challenges associated with rising oil prices pose a significant burden for any government of an oil-importing nation.
Without financing opportunities, governments must reduce spending in other sectors or generate additional revenue when prices increase. Achieving this quickly and efficiently is also a daunting task. It will likely result in procyclical fiscal policies, imposing a significant burden on the private sector and the impoverished, contributing to macroeconomic instability, e.g., monetary financing, currency rate volatility, debt rescheduling and uneven economic growth and causing social and political discontent.
Furthermore, oil price volatility complicates budget planning, as incorrect oil price…
