Sets conditions for releasing second instalment of $1b credit
The International Monetary Fund has asked the government to increase prices of petroleum products by Tk 10 per litre by next month as part of its condition to release $140 million, the second instalment of its $1 billion credit.
The IMF early this month sent to the government a set of conditions for the disbursement of the money. The list also includes recommendations for introducing an automatic fuel price adjustment mechanism and amending some provisions of banking and VAT related laws, a top government official told The Daily Star.
Already, the Fiscal Coordination Council and Resource Committee sat with Finance Minister AMA Muhith on November 14 to discuss the matter, among other things.
The meeting agreed to hike fuel prices but did not settle on the amount, according to a finance ministry official. Another official of the ministry said the prime minister would make the final decision. Both the officials spoke on condition of anonymity.
The IMF will send a mission to Dhaka towards the end of this month to review the government’s response to its conditions. The issue of increasing fuel prices is likely to top the agenda during the discussion.
At present, kerosene sells Tk 61 a litre, petrol Tk 91, octane Tk 94 and furnace oil Tk 60.
The government last time hiked fuel prices by Tk 5 per litre flat on November 29 last year. On November 10 the same year, prices of all fuel oils rose by Tk 5 a litre. Earlier in September that year, the government increased the price of furnace oil by Tk 8 a litre while the prices of kerosene, diesel, petrol and octane by Tk 5 per litre.
Last month, the finance minister held several meetings with top IMF officials on the sidelines of the World Bank-IMF annual meeting in Tokyo. During the talks, the IMF urged the minister to increase prices of fuel oil, fertiliser and electricity to ease the subsidy pressure.
The total subsidy allocation in the current fiscal year’s budget stands at Tk 37,000 crore. Of the sum, Tk 20,000 crore is meant for power and energy sector and Tk 6,000 crore for fertiliser.
Meanwhile, the finance ministry has prepared the draft Memorandum of Economic and Financial Policies (MEFP), outlining various plans to cut subsidy on energy and fertiliser.
The MEFP is the financial reform strategies to be undertaken by the government and to be sent to the IMF. It is a prerequisite for getting the second tranche of the IMF’s Extended Credit Facility.
The draft says the Bangladesh Petroleum Corporation, the Bangladesh Power Development Board and the Bangladesh Chemical Industries Corporation will gradually bring down subsidy related loans from the state-owned banks to zero.
It, however, does not mention a timeframe for that.
Also, dependence on rental power units will be reduced at the soonest to slash subsidy on electricity, according to the draft.
Source: The Daily Star