The International Monetary Fund has welcomed Bangladesh’s efforts to cut subsidies for the energy sector by increasing the prices of fuel oil, gas and electricity, indicating more price hikes.
In a country report on government requests for loans, the IMF said authorities would explore options to gradually reduce energy subsidies.
Control measures could exacerbate ongoing difficulties and harm both near-term growth and medium-term economic potential, the report said, but rationalization of energy subsidies would free up financial resources for social and development spending.
Recent price hikes have brought petroleum prices broadly in line with international prices, with gas and electricity subsidies expected to rise to 0.9 percent of GDP in fiscal 2023, up from 0.5 percent a year ago. The IMF called for the cut, welcoming the recent hike in electricity prices. subsidy.
“The authorities will explore options to gradually reduce gas and electricity subsidies while strengthening the social safety net.”
The IMF’s executive board on Monday approved a loan to Bangladesh at the government’s request, helping the country build a buffer against a depletion in foreign exchange reserves. The global lender on Thursday released $476 million in the first tranche of the $4.7 billion loan it has approved for Bangladesh.