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IMF Suggested to Reduce Subsidy And Loans

IMF Suggested to Reduce Subsidy And Loans
Photo Courtesy: U-INTOSAI

In the budget of the current fiscal year 2022-23, the government has allocated 82 thousand 745 crores BDT for subsidy. This subsidy has been kept for fuel oil, gas, electricity, and fertilizers. A delegation of the International Monetary Fund (IMF) has suggested reducing this massive subsidy due to the ongoing reality of the economy. The group also suggested reducing bad debt in Bangladesh and increasing good governance in the banking sector. However, the IMF expects the tax-GDP ratio to be raised to at least 15%, and gas and electricity prices need to be adjusted to a reasonable level. The article contains IMF Suggested to Reduce Subsidy And Loans.

The IMF staff mission visiting Dhaka held a meeting with Bangladesh Bank, Ministry of Finance Finance Department, Financial Institutions Department, and Ministry of Commerce to review the overall situation of Bangladesh’s economy. This information is known from the sources of the meeting. According to the sources, the main objective of the IMF team in this visit is to emphasize the increase in tax collection rate more than the gross domestic product (GDP). As a result, they expect the tax-GDP ratio to be raised from a mere 10.8 percent to at least 15 percent.

The sources in the Finance Department, the party is waiting for a meeting with Finance Minister AHM Mustafa Kamal. The Department of Finance and the Ministry of Commerce asked what steps Bangladesh has taken to deal with the impact of the Russia-Ukraine war, the preparation of the list of least developed countries that will leave the list in 2026, and the possible risks it may face. In addition, Bangladesh Bank has asked about the reform of the banking sector.

The visiting IMF team reportedly did not express dissatisfaction with Bangladesh’s debt-to-GDP ratio. However, according to ERD data, debt-to-GDP is now 41 percent. Furthermore, the team observes that the foreign exchange reserves have fallen to about four thousand billion dollars but have not reached the level of risk. An official of the finance department said that the government wants a loan of 4.5 billion dollars from the IMF. But, to get this loan, they have to accept some conditions. As part of that, some decisions have been taken, like, gas-electricity prices will also be adjusted.

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