Govt plans to increase food subsidy

The government is planning to increase food subsidies in the next fiscal year going against the recommendation of the International Monetary Fund (IMF) due to various reasons, including the devaluation of taka against the US dollar.

Sources at the Food Planning and Monitoring Unit (FPMU) of the food ministry said the proposed allocation for food subsidy has been decided to be Tk 6,500 crore.

However, the final decision in this regard will be made at a meeting of the Food Planning and Monitoring Committee (FPMC) at the conference room of the cabinet today. The meeting may decide to slightly change the amount of the proposed allocation. Food Minister Sadhan Chandra Majumdar will preside over the meeting.

In the current fiscal year 2022-23 (FY23), the allocation for this sector is Tk 5,900 crore, meaning the allocation is estimated to increase by Tk 600 crore.

Sources said apart from a strong dollar, the increase in Libor rate as well as increase in the US treasury interest rate and increase in interest rate on government treasury bonds is resulting in the planned increase in food subsidies.

Meanwhile, despite its plan to raise food subsidies, the government has already increased fertiliser prices by Tk 5 per kg. Also, gas and electricity prices have been hiked multiple times in the past few months in line with the IMF’s recommendation. The international lender under its massive $4.7 billion loan programme has recommended the government reduce subsidies.

According to a finance ministry report, there was a Tk 1,78,932 crore allocation for subsidies, incentives and financial assistance in the original budget for FY23. However, in the revised budget, the Finance Division has allocated an additional Tk 16,812 crore as subsidy for agriculture, electricity and food assistance.

A recent meeting of the finance ministry’s Coordination Council on Finance, Currency and Exchange Rate has recommended a budget of Tk 7,59,955 crore for FY24, which is 15.2 per cent of the estimated gross domestic product (GDP).

Officials familiar with the matter said although the prices of gas and electricity have been increased as per the conditions of the IMF, the budget for FY24 is being prepared on the basis that there are not many opportunities for price hikes in the election year.

They said subsidy allocation is being increased to bring stability to the economy and control inflation this year. Because, even if the prices of fuel oil, gas and coal in the international market go down to the pre-war level, it will take more time to reach the pre-pandemic level.