That an IMF (International Monetary Fund) delegation on a visit to Bangladesh has no objection to the provision of subsidies in the power and energy sector is not unconditional. The beneficiaries of this provision have to be none other than the poor. But the affluent will have to pay the market rates for utilities like power and energy. Now, how this can be worked out is a key question. Currently, consumers consuming electricity beyond different thresholds have to pay more than the flat rate. Even this cannot ensure that the affluent pay their electric bill at a rate close to the generation cost. The IMF has long been pressing for withdrawal of subsidies from power. Now this latest prescription certainly has its merit. It proposes justice for the poor and taxing the rich with a suitable price based on the actual cost of power generation.
The IMF has suggested development of a mechanism for allowing the poor to enjoy the subsidy benefits while the rich consumers would be made to pay a higher rate in sync with the production cost. Since the existing price gap of power consumed by poor and rich consumers cannot justify rational use of subsidies, it needs a rational review. The threshold systems can be revised and updated for fixing appropriate rates for consumers using large amounts. In case of natural gas or other fossil fuels, such a system cannot be applied. When it comes to piped gas for domestic purposes, a house-to-house inspection can differentiate between poor and affluent consumers. But when the purchase of gas or coal from open market is concerned, no mechanism for distinguishing the rich from the poor will work. All consumers were beneficiaries of the Tk 426 billion additional subsidy allocated in the past fiscal year for import of oil, gas, electricity and fertiliser during the Middle East conflict. The same is true for the current fiscal's electricity subsidy amounting to Tk370 billion.
So areas like this beg rationalisation of rates of energy and power for the poor and the privileged. Like other international financial institutes, the IMF, according to its claim, promotes economic development, reduce poverty and finance large-scale infrastructural projects across developing nations. But the countries receiving funds have to comply with conditions set for the purpose. The pressure for withdrawal of subsidies is part of deals between the receiving countries and the multilateral lenders. No wonder, the bargain over IMF's new loan package will continue.
Meanwhile, the government is trying its best to put its house in order. It seems to have made a point that the political government has obligations for public welfare and the various reforms prescribed by the IMF will be implemented in phases. Such major initiatives cannot be implemented overnight. The new loan package of US$4.0-4.5 billion under discussion is conditional to financial-sector reforms, development of the stock market and capital market along with revenue mobilisation. This also encompasses an increase in the tax-to-GDP ratio. Clearly, before another high-level delegation's visit following the IMF-World Bank group's annual meeting in October, the fate of the loan package will remain undecided. Although the finance minister is upbeat about a positive outcome, nothing is certain yet. Much will depend on the steps the government takes to expedite the process of reforms.
