Bangladesh is preparing to submit a three-year roadmap on electricity subsidy reforms to the International Monetary Fund (IMF) by October 15, 2025.
A special committee formed by the Power Division has been tasked with preparing the roadmap, which aims to phase out subsidies within three years. The committee, led by Additional Secretary KM Ali Reza, held its first meeting today at Bidyut Bhaban.
“We have submitted a roadmap addressing short, medium, and long-term reforms in the power sector,” a committee member said.
As part of the reform, the government is considering providing direct cash transfers to around 1.80 crore “lifeline” or vulnerable electricity consumers under a system similar to existing social safety net programs. This would replace blanket subsidies with targeted support.
If approved, the Power Division, the Social Welfare Ministry, and the Bangladesh Bureau of Statistics (BBS) will jointly identify and support actual vulnerable consumers.
The government currently spends heavily on power subsidies—about Tk62,000 crore in FY2023-24 alone. Of Bangladesh’s 4.88 crore electricity users (as of August 2025), more than 1.63 crore are under the Bangladesh Rural Electrification Board (BREB).
IMF’s recommendations
Earlier, an IMF technical team placed a series of recommendations to mitigate the impact of electricity pricing on vulnerable groups. These include: adjusting the tariff structure to reduce regressively, improving interoperability between the social registry and electricity distributors to enable automatic application of targeted discounts, developing pilot schemes using geographic targeting to phase out tariffs in wealthier areas while expanding targeted social programmes, expanding coverage and enhancing targeting of social registry programmes to better reach poor households, and implementing a broad-based tariff increase, paired with a national PMT-based transfer system to support both low- and middle-income households.
Launching a communications strategy to build public understanding of tariff reform, alongside outreach campaigns to promote service quality and energy efficiency.
The IMF also recommended overhauling the tariff-setting process, including replacing the cost-plus methodology with one that incentivises efficiency, strengthening BERC’s regulatory role, and creating a harmonized utility data system to improve transparency.
Gradual subsidy phase-out
The IMF report urged Bangladesh to adopt a three-year roadmap to gradually reduce subsidies, set annual reduction targets, and align tariff hikes with subsidy cuts.
It also suggested retiring inefficient and costly power plants to address overcapacity, developing coordinated infrastructure plans across generation, transmission, and gas distribution, seeking support from development partners for a Power Sector Model to improve planning and cash flow oversight, and investing in transmission to remove bottlenecks.
On gas, the IMF recommended revising domestic prices to reflect true costs and developing a distribution investment plan to reduce supply constraints.
Expert views
Prof. M Tamim, energy expert and Vice Chancellor of Independent University, Bangladesh (IUB), told Just Energy News that the proposed reform will be politically difficult.
“The upper middle class, who are major electricity consumers, are the main beneficiaries of the current subsidy. But I think targeted subsidy is the right way,” he said.
He stressed the need for a reliable, data-driven system to identify marginal electricity users. “We do not yet have actual household income data. It will take several years to prepare the database of vulnerable groups,” he cautioned, adding that the biggest challenge lies in administration.
He noted that energy bills should not exceed 10% of household income, yet in some cases, families spend 30-40% of their income on electricity.
BPDB’s financial strain
The IMF report also flagged the worsening financial position of the Bangladesh Power Development Board (BPDB), the country’s sole electricity buyer. Existing tariffs and subsidies fail to cover power purchase costs, leading to ballooning losses.
In FY2023-24, BPDB’s break-even bulk tariff jumped to Tk11.74 per kilowatt-hour, almost double the Tk6.18 needed in FY2019-20. Without tariff reforms, the IMF warned, BPDB will be unable to recover losses or invest in critical infrastructure upgrades.
The International Monetary Fund (IMF) has urged Bangladesh to reform its power and energy tariff structures as part of the conditions for disbursing the next tranche of loan assistance.