Finance adviser for review of power, fuel, fertiliser prices
Finance Adviser Mirza Azizul Islam yesterday said that it is not possible for the government to maintain the budgetary discipline for long if it continues to provide subsidy for keeping low the prices of power, petroleum, gas and fertiliser.
"We must review the administered price, not only of power but also of other products," the adviser said after a meeting with visiting Vice President of the Asian Development Bank (ADB) Liqun Jin. He arrived in Dhaka yesterday on a three-day visit.
If the ongoing subsidy trend continues, current budget deficit of Tk 29,836 crore will reach Tk 36,468 crore, according to a finance division estimation.
When production or import cost is high, the government provides subsidy so that the prices of products remain within people's reach, which is called "administered price."
"It is not possible for the government to continue subsidy-based financing for long," the adviser said while talking to the reporters after the meeting with ADB vice president at the Planning Commission.
Different issues relating to power sector, aid for flood rehabilitation and governance were main topics of discussion at the meeting.
The ADB is providing Bangladesh government $465 million loan for development in the power sector. The first instalment has already been given and the second is expected by December.
Replying to journalists' query whether the ADB had placed any condition to hike the power price, the adviser said, "They haven't placed any such condition, nor have given any specific date for raising the price," adding "but personally, I think we should adjust the price because it ultimately harms efficiency (of the sector)."
Asked about the possibility of review of administered prices by December, Azizul declined to comment, saying, "Let's see."
The finance division has already submitted a report to the finance adviser about different ministries' demands for additional finances as the ministries are providing subsidies on different products, and its impact on the budget.
The government will have to provide additional Tk 6,286 crore budgetary allocations to meet the ministries' demands. This will add up to already granted Tk 4,186 crore subsidy.
"Government borrowing from the banking system will rise alarmingly, pushing up interest rate and already rising inflation rate. Credit flow to the private sector and currency exchange rate will be badly affected," reads a finance division report submitted to finance adviser last month.
Meantime, the ADB has hinted at giving a $120-130 million loan for flood rehabilitation.
"Roughly, half of this is new money (fresh allocation) and the rest will be reallocation from other projects," Azizul said.