Though the government denies any intention to increase the fuel prices, it has already committed to the International Monetary Fund (IMF) to do that within this fiscal year (FY).
The government also has promised to prepare a report for the IMF showing the revenue losses due to not adjusting the gas and petroleum prices, and outlining the measures to mitigate the adverse impacts of a further adjustment of oil prices on the vulnerable groups.
In a 'memorandum of economic and financial policies' placed before the IMF board on its February 3 meeting, the government said, "In view of the substantial surge in energy prices since the beginning of FY05, we recognize that further price adjustments are needed, especially for kerosene, diesel, and gas."
"Increases in domestic prices already implemented have reduced the monthly operating losses of BPC [Bangladesh Petroleum Corporation] from levels experienced in FY05. In addition, we intent to make further price adjustments this fiscal year to further reduce and eventually eliminate these losses," went on the memorandum.
In the memorandum, the government said, "We will also prepare a report quantifying the quasi-fiscal costs arising from prices below the international levels in the energy and power sector, including the implicit subsidies and revenue foregone by underpricing of natural gas."
Submission of the report by April has become a condition, besides three others, for Bangladesh to get the sixth tranche of the PRGF loan, scheduled to be disbursed in June.
One of the other three conditions is to make the Large Taxpayers' Unit at the National Board of Revenue (NBR) more functional by introducing risk-based taxpayer audit procedures and a system of uniform taxpayer identification numbers by April 30.
Finalisation of a comprehensive report reviewing all the tax exemptions and incentives, and evaluating the associated revenue losses is another condition.
The last condition is to name a preferred bidder for Rupali Bank in line with the agreed tender procedures and selection process for technical and financial evaluations.
A letter of Finance Minister Saifur Rahman to IMF Managing Director Rodrigo de Rato accompanied the memorandum explaining why Bangladesh had failed to meet some of the IMF conditions for getting the fifth tranche of its Poverty Reduction Growth Facility (PRGF) loan.
In the letter, Saifur said, "Owing to delays in the disbursement of external program assistance and in implementing structural reforms, several quantitative and structural performance criteria for the fourth review were not observed. The targets for net international reserves, net domestic assets of the central bank, and net bank credit and total domestic financing of the government were missed."
