The Financial Express

Power-tariff hike and IMF loan

| Updated: February 03, 2023 21:24:22

Power-tariff hike and IMF loan

Barely a month could pass before the government forces another round of rise in power tariff with immediate effect. There is no knowing if this will be the last such tariff hike within a short time. Notably, natural gas tariff increased on January 18 last to the upper limit at 178.88 per cent higher also came into effect simultaneously from February 1. The atrocious hike in power and energy tariffs will prove to be a punch under the belt for the majority of consumers. Only more so, because they have been reeling from the unprecedented market volatility ever since the Covid-19 destabilised their financial positions only to be further worsened by domino effects of the extremely higher energy prices and disruption of supply chain of energy and commodities due to the Russo-Ukraine war.

Clearly, the government is pursuing a policy of passing the buck, complain some experts, on to the consumers---both bulk and retail---without cleaning the Augean stables. Now under pressure for carrying out long stalled financial reforms from international aid agencies like the International Monetary Fund (IMF), the government has opted for the easy way out. Significantly, the day the government announces its decision for the rise in power tariff, the IMF also approves a loan of US$ 4.7 billion for Bangladesh. So, anyone can see that the latest power- and gas-tariff hikes are bitter pills Bangladesh had to swallow in order to comply with the recipe formulas of the economic reform package before proving its creditworthiness. Multilateral organisations are more concerned with macroeconomic stability than political and administrative reforms. One intriguing question here is the extent of corruption which results in money laundering on a massive scale. According to the Global Financial Integrity, money siphoned off 'through invoice fraud during the 2008-15 period' was to the tune of US$ 8.2 billion. Then reports have it that 'more than $7.50 billion is laundered annually through 'trade misinvoicing and illegal money outflow'.

If only financial corruption could be checked and money laundering, the amount of which is reportedly larger than the loan IMF has sanctioned, plugged, did the country need to seek loans with such shoe-strings attached? This makes it incumbent on the country to go for administrative reform so that good governance is ensured and corruption rooted out. Neither bureaucratic dominance nor weaknesses can set the right tune for transparent and accountable governance which is the prerequisite for maintaining transparency in development expenditure, trade transactions and revenue collection. So there is doubt about the positive outcome of the piecemeal reforms to banking sector, revenue systems and business modalities suggested. This is more like missing the wood for the trees.

What will be the system of payment of the installment of loans will also determine how the amount will help in management of current-account deficit and stabilising forex reserve which are the two prime objectives of accepting the loan. Well, a country largely dependent on imported energy cannot avoid the snowballing impacts of global economic crunch and contraction. But the increased tariffs on gas and power heads will hardly be of help. There are vast grey areas in business apart from direct corruption such as bribery or commission to bring under the scrutiny for augmenting revenue. Let the government get its priority right.

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