The interim government has informed the visiting International Monetary Fund (IMF) that it has no plans to increase natural gas tariffs at this time, as the proposed adjustment could exacerbate inflationary pressures.
Energy and Mineral Resources Division (EMRD) Secretary Mohammad Saiful Islam responds to IMF mission’s natural gas tariff adjustment suggestion during a meeting here in Dhaka.
Energy and Mineral Resources Division (EMRD) Secretary Mohammad Saiful Islam also confirmed it to the Just Energy News about the government’s response to the IMF team regarding the adjustment of the natural gas tariff, which is part of the conditions for the disbursement of the next two installments under the IMF’s $4.7 billion loan program.
Chris Papageorgious, the chief of the IMF’s Development Microeconomics Division, led the high-level team on Tuesday.
The IMF team is particularly interested in understanding the subsidies related to natural gas and petroleum fuels, as well as the potential for tariff adjustments.
“We have firmly rejected any upward adjustment of the natural gas tariff at this moment, as such an increase could push inflation higher,” said EMRD Secretary Saiful Islam, reflecting on the outcome of the meeting with the IMF on Tuesday.
The secretary explained that the government is currently providing a subsidy of Tk 0.98 per cubic meter for natural gas. This subsidy has increased due to the higher cost of imported LNG, which the government now buys at Tk 65 per cubic meter.
“We assured the IMF that this subsidy would be significantly reduced, as the government has opened up opportunities for all companies to import LNG from the spot market,” the secretary said. He added that the number of shortlisted companies for LNG imports has increased to 33, up from 22.
“We are now making a modest profit from petroleum fuel marketing, and Bangladesh Petroleum Corporation (BPC) has no outstanding arrears for importing petroleum fuels,” he added with pride.
The secretary further noted that the government’s smart negotiation strategies had saved substantial foreign currency reserves.
“The secretary also stated, ‘We are planning to implement austerity measures in office expenditures, reduce system losses in the distribution and transmission of natural gas, and continue our drive against illegal gas connections to reduce the subsidy.'”
He pointed out that there is a budgetary gap of around Tk 23,000 crore, including Tk 4,000 crore that remains unpaid by the Power Division.
IMF urges power tariff hike amid rising inflation
International Monetary Fund (IMF) has called for an increase in power tariffs in Bangladesh despite the country grappling with rising inflation and the economic strain following recent devastating floods. This move is part of the conditions for the disbursement of the next two installments under the IMF’s $4.7 billion loan programme.
The IMF’s directive comes at a critical time as Bangladesh’s annual inflation surged to 10.87 per cent in October 2024, up from 9.92 per cent the previous month. The escalation in inflation follows severe flooding in August 2024, which inflicted an estimated Tk 14,421.46 crore in damages and exacerbated the financial hardships faced by a huge portion of the population.
Their agenda includes reviewing nine key areas, notably the upward adjustment of power tariffs. The IMF aims to eliminate subsidies in the power sector within three years by aligning tariffs with actual supply costs tomorrow.
Official sources said the Power Division might have rejected the IMF’s suggestion to raise the power tariff at this time.
