BM Desk : The interim government has decided not to increase electricity prices at this time. The government informed the visiting delegation of the International Monetary Fund (IMF) that it does not intend to raise electricity tariffs immediately, even though it aims to gradually reduce subsidies. Officials explained that a price hike now would further fuel inflation and worsen public suffering.
However, the government reaffirmed its commitment to continue reforms aimed at reducing subsidies.
The IMF delegation, led by Chris Papageorgiou, head of Development Macroeconomics in the IMF’s Research Department, held several meetings with various government agencies during its visit to Dhaka. On Thursday, the team held a “mid-mission brief” with the Ministry of Finance, chaired by Finance Secretary Dr. Khairuzzaman Mozumder. The IMF delegation shared its observations on issues such as revenue enhancement, subsidy reduction, banking sector reforms, and the government’s plan to merge five banks.
According to sources, finance ministry officials told the IMF team that the interim government will not raise electricity prices before the upcoming national elections scheduled for early February. Earlier, the delegation also met with officials from the Energy and Mineral Resources Division and the Bangladesh Power Development Board (BPDB) to inquire whether the government planned to raise electricity tariffs to rationalize subsidies. BPDB officials told the IMF that they would wait for the next elected government’s decision. They also said that internal reforms are underway to cut operating costs, including reviewing existing power purchase agreements with independent producers—steps expected to significantly reduce expenses and, in turn, subsidies.
According to the finance division, the current (FY2025–26) budget allocates Tk 370 billion for electricity subsidies. The government spent Tk 596 billion on power subsidies in FY2024–25 and Tk 330 billion in FY2023–24. Under the IMF loan program, Bangladesh is required to reduce subsidies to zero by 2027.
During the mid-mission meeting, the IMF delegation also recommended accelerating banking sector reforms. It noted that the government is injecting Tk 200 billion in capital into the five Shariah-based banks being merged, which could increase inflation. The IMF advised ensuring due process in the recapitalization effort and warned that the merger may not yield benefits without restoring stability in the banking sector.
The IMF also emphasized the need to boost revenue collection rather than rely heavily on borrowing to finance government spending. Since the loan program began, the government has missed IMF’s quarterly tax revenue targets several times. Although most conditions for the sixth disbursement have been met, revenue and development spending targets remain unfulfilled.
The visiting team held multiple meetings with the National Board of Revenue (NBR) about increasing tax revenue. When the IMF suggested raising duties, NBR officials responded that no new taxes or withdrawal of existing tax exemptions would occur before the designated time. Structural reforms will continue under the IMF program, but no sudden policy changes or tax hikes are planned midyear given the current economic conditions.
NBR officials added that existing sunset policies on tax exemptions would remain in force until their scheduled expiry. They noted that imposing a flat 15% VAT on all goods and services is not feasible right now, as it would increase inflation and harm essential sectors. Following IMF advice, the government already raised VAT and supplementary duties on about 100 goods and services last January. However, most goods and services are already under the 15% VAT rate, with essential items like food, remittance services, poultry, fisheries, and some health services either tax-exempt or taxed at reduced rates. Officials told the IMF that the government intends to gradually move toward a unified VAT structure, not through abrupt changes.
In January 2023, the IMF approved a $4.7 billion loan package for Bangladesh. The total was later increased to $5.5 billion in June 2024 with the approval of the fourth and fifth tranches. Bangladesh is set to receive the funds in eight installments and has so far received $3.6 billion. The ongoing IMF mission, which began on October 29, is assessing progress on conditions before the release of the sixth tranche, and is expected to conclude its visit on November 13.
