Paving way for economy sans subsidy

FE Team | Published: December 13, 2024 20:03:05

During its meeting with Bangladesh Power Development Board (BPDB), the visiting IMF delegation is learnt to have suggested it to raise power tariff and cut power subsidy. Notably, since Bangladesh reached a US$4.7 billion loan deal with the IMF in January 2023, the government hiked power price several times. As recommended by the international lender at the time of its second review mission during April-May this year, the previous government drew up a plan to increase power price four times a year and remove all subsides in the power sector within the next three years. Subsidy is a huge burden on the economy, which needs to be done away with by all means. In this connection, the Consumer Association of Bangladesh (CAB), for instance, blamed the previous government for increasing power and fuel prices only to protect the interest of its cronies in business and continue the prevailing culture of corruption and irregularities in the power sector.
In the previous fiscal year, for instance, the subsidy for power amounted to Tk 350 billion and for gas, it was Tk 65 billion. For the current fiscal year (FY 2024-25), the allocation made for power subsidy is US$360 billion. The astronomical sums of money were used to pay the accumulated bills of independent power producers and rental power plants. So, it is hardly surprising that this subsidy burden on the government continues to rise, if only for the reason that unpaid power bills pile up all the time despite hiking of the power tariff to the dismay of the hapless consumers. In fact, it is a vicious circle that has to be broken so that the power and energy sectors could function on their own without costing the public exchequer.
Obviously, as the consumers' interest protection body suggested, the successive governments' priority should have been addressing the issue of corruption and irregularities in the power sector, in particular. In that case, the consumers could be relieved of the tyranny of endless escalation of power and energy prices while at the same time the government would not have to bear the undesirable burden of subsidies. Now that the burden is already on the government's, or for that matter on the nation's shoulder for whatever reason, it must be gotten rid of by all means. Small wonder that the global lender has set this condition of power tariff for releasing the fourth tranche of the loan it has already committed and confirming the fresh amount of loan worth US$3.0 billion that previous government has made a request for.
Now the IMF's third review mission has already started its assessment of progress the government has so far made on fund utilisation and in meeting all the criteria multilateral lender had set as a condition for releasing the 4th tranche of loan. However, the seven performance criteria that IMF imposed including international reserves, budget deficit, accumulation of external payment arrears, reserve money, tax revenue, priority social spending and capital investment, according to the Finance Division people, have meanwhile been met excepting the revenue collection target. The government by June of this year could collect Tk3.692 trillion which fell by Tk253.21 billion short of the IMF-set target. Notably, the government could also meet IMF's condition of the net international reserve, thanks to the multilateral lender's lowering the required threshold in May this year as requested by the then-government. In fact, the revised target was fixed at US$14.79 billion, which earlier was US$20.11 billion. Against this backdrop, it is hoped the interim government would finally be able to pave the way for a sustainable economy free of subsidy.