The visiting International Monetary Fund mission on Thursday asked the government to increase power tariffs to clear arrears and reduce subsidies.
It also inquired about the calculation procedure for the monthly fuel price adjustment formula during a meeting with the energy and power division.
Officials attending the meeting said that the power division apprised the IMF of plans for increasing the power tariff gradually to reach production costs by May 2026.
They also said that the government had hiked power tariffs on four occasions in 2023 and 2024.
The next power price hike may be delayed, officials said.
The IMF mission that will conclude the current visit on May 8 recommended the adjustment of electricity, gas, and fuel prices more regularly to reduce budget subsidies.
The multilateral lender observed that the budget allocation for subsidies in the outgoing FY24 remained high, around 2 per cent of GDP, as domestic electricity and fertiliser prices remain below cost-recovery levels, despite being raised several times.
The current IMF mission is linked to the disbursement of the next tranche under the $4.7 billion loan progarmme taken by the government to tackle the shortage of dollars that pulled down the reserve below $20 billion from $48 billion in August 2021.
Since 2023, the IMF has already disbursed $1.1 billion, and the next tranche is due this month.
Finance ministry officials have already calculated the power subsidy at Tk 35,000 crore in FY25 because of overcapacity by around 50 per cent.
Besides, pressure on subsidies will persist because outstanding arrears are set to cross Tk 45,000 crore.
In the outgoing FY24, around Tk 35,000 crore has been allocated for power subsidy from Tk 17,000 crore in FY23.
The energy division officials said that they had received an update about the monthly fuel oil price adjustment formula, one of the major conditions of the current loan programme.
On Tuesday, the government increased retail prices of diesel, kerosene, petrol, and octane as part of its monthly review of fuel oil prices.
The price of diesel and kerosene was increased by Tk 1 to 107 per litre from the existing Tk 106, while the price of petrol was set at Tk 124.50 per litre from Tk 122, up by Tk 2.50 per litre, and the price of octane was set at Tk 128.50 per litre from Tk 126, up by Tk 2.50.
The first review of the price adjustment was made in March under a guideline that stipulated the price adjustment of petroleum fuels, including petrol, diesel, octane, kerosene, furnace oil, jet fuel, and marine fuels.
All expenses, including the international market price, import tax, advance income tax, valued added tax, operational expense, finance, administrative and maintenance costs, and margins of Bangladesh Petroleum Corporation, have been taken into account to fix the prices.
