The International Monetary Fund (IMF) recommendation to reduce subsidies is likely to be reflected in the budget for the upcoming FY25. So, the government is going to allocate less money for subsidies compared to the ongoing financial year.
Although the government has been under subsidy pressure, the issue has somewhat been eased due to price hikes of electricity and gas in several phases.
The Finance Division – under the finance ministry – has plans to allocate Tk 83,500 crore for subsidies and incentives in the upcoming budget.
However, if the revised budget allocation for subsidies and incentives in the current FY is taken into account, the new allocation would be Tk 14,500 crores lower. In the FY24 budget, the actual allocation for the subsidy was Tk 1,10,672 crore, according to Finance Division sources.
On condition of anonymity, a top Finance Division official told The Business Post, “The subsidy should be reduced, but the government still needs to continue providing this facility in the coming days.
“Now is not the time to completely cut subsidies from everything. However, the subsidies must be reduced significantly by 2026.”
The government has already taken a few steps in this regard on IMF recommendations. For example, it had increased electricity prices four times in a year and reduced subsidies in this sector.
Apart from this, the Bangladesh Bank has already issued a notification to decrease the incentives for exports.
Apart from this, the price of Liquefied Natural Gas (LNG) in the international market has come down by half compared to a year ago. Subsidy on fuel has also come down to almost zero. As a result, subsidy allocation will be reduced for this sector.
However, the allocation may increase or decrease a little before the budget is presented in the national parliament, said Finance Division officials.
According to sources, of the subsidies, Tk 30,000 crore may be allocated for the power sector in the next FY. The agriculture sector may get Tk 21,000 crore. A subsidy of Tk 7,500 crore is being considered for export incentives, Tk 7,000 crore for LNG imports, Tk 7,000 crore for food, and Tk 6000 crore for bringing remittance.
Price hikes of fertiliser, water and LNG might be recommended to reduce the total amount of subsidies.
These figures were finalised at a meeting last month. The IMF's demand for rationalisation in subsidy management was also discussed there, sources said.
Apart from subsidies and incentives, cash loans and advances are also being considered as subsidies. In the budget for FY25, allocation will be kept for lending to non-financial institutions.
Although loans were given to the Trading Corporation of Bangladesh (TCB), Bangladesh Sugar and Food Industries Corporation, Bangladesh Jute Mills Corporation and others, the government is not getting this money back.
As a result, the allocation for these is also a kind of subsidy, say economists.
