Bangladesh needs to clear electricity, fertiliser subsidy arrears within 5 years: IMF

Bangladesh needs to clear its electricity and fertiliser subsidy arrears within the next five years, according to a condition set by the International Monetary Fund (IMF) as part of its $4.7 billion loan programme.

The international lender stated the condition in its “Staff Report” released on Tuesday (25 June) after approving the third tranche of the loan package.

In the report, the IMF said the government has committed to avoiding any further accumulation of net arrears and plans to gradually clear these arrears through transparent transfers from the budget over the next five years.

The IMF noted that increased subsidy demands from independent power producers (IPPs) and fertiliser suppliers since fiscal year 2021-22 have resulted in domestic arrears of about 1% of GDP.

”The issuance of special bonds to commercial banks at below-market interest rates to pay off outstanding debts of electricity and fertiliser companies in lieu of subsidy payments should be discontinued.” IMF said.

According to the Ministry of Finance, as of March 2024, the government had an outstanding electricity subsidy of approximately Tk25,000 crore and a fertiliser subsidy arrear of approximately TK15,000 crore.