Abolish capacity charge to save PDB: IMF

The International Monetary Fund delegation visiting on Wednesday said the government should get rid of the capacity payment to save the loss-making electricity development board and expressed concern about economic growth due to the current restriction of imports.

IMF officials made the observation on capacity charges during their meeting with officials of the Electricity Division and its subsidiary Electricity Development Board, as they explored whether the policy whose there is so much talk about the ability payment would end by 2030.

The government paid about Taka 76,115 crore as capacity charge over the past decade. Under a legally binding agreement, it must pay the fee to private power generation companies whether their capacity is used or not.

IMF officials also wanted to know the possible impacts on the economy should the government withdraw subsidies from the power sector.

According to the Ministry of Finance Economic Review 2022, the Electricity Development Board suffered a net loss of more than Tk 60,000 crore between the fiscal years 2010-11 and 2020-21, mainly due to capacity load controversial.

Bangladesh Consumers Association energy adviser Mr Shamsul Alam said the payment of capacity charges under the controversial power generation policy by independent power producers is a curse for the country. nation.

The county cannot use half of its power generation capacity and is being forced to pay a huge capacity charge to IPPs due to random power outages since July, he said.

Energy Division Secretary Habibur Rahman, in an interview with reporters from the secretariat, said the IMF was seeking updates on the country’s efforts in renewable energy generation.

APB officials, however, said IMF officials were focusing more on power purchases from independent power producers.

In response to an IMF proposal to take commercial loans from banks instead of receiving government grants, officials said such a proposal was not viable because access to electricity is a human right. all.

They said they had made no assessment of the end of the capacity charge since the establishment of many new power plants by private groups was underway.

IMF officials, when meeting with Commerce Ministry officials on the same day, sought to know about the possible negative impacts on the country’s economic growth due to the current import restrictions.

He also sought to project the country’s exports for the next three years amid a looming recession in Western countries.

The IMF mission also researched in detail Bangladesh’s export diversification plan prior to the country’s graduation from least developed country status.

Commerce Ministry officials headed by its secretary Tapan Kanti Gosh told IMF visitors that the government had restricted the import of luxury and consumer goods to ensure the availability of foreign currency for the import of essential goods. such as fuel oil and foodstuffs.

They suggested the restriction would be lifted once world market commodity prices fell.

In an interview with reporters, Tapan Kanti Gosh said they expected the country’s exports to rebound in winter despite falling in recent months.

Export earnings in September and October fell by more than 7% respectively.

The country has attached importance to the export of ICT goods, agricultural products and plastic items as part of export diversification to get rid of the narrow export basket dominated by ready-to-wear garments. à-porter, Commerce Ministry officials said in response to questions from the IMF on export diversification.

The country achieved lower-middle-income country status in 2015 and met all the criteria to graduate from LDC status, with graduation to be effective in 2026.

The country has taken several steps to overcome the challenges of LDC graduation from 2026.

A task force of public and private sector experts under the aegis of the Prime Minister’s Office is formulating strategies, according to Commerce Ministry officials.

In addition, the country will benefit from an additional three years of preferential duties from the European Union after 2026, which will help support Bangladesh’s export earnings from its largest EU market.

Commerce Ministry officials have also appealed to the World Trade Organization for the extension of different countries’ tariff preference facility under WTO rules to help the country exit.

During ongoing negotiations with the multilateral lender, Bangladesh has attached importance to signing free trade agreements with various countries as part of LDC graduation, but IMF officials have expressed doubts the success of FTAs ​​without rationalizing tariffs and eliminating para-tariffs.

The IMF mission which began on October 26 will end on November 9 as part of negotiations on the proposed $4.5 billion loan that Bangladesh has requested from the lender for budget support.

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