Recent adjustments to the exchange rate of the U.S. dollar by Bangladesh Bank are poised to trigger more frequent hikes in gas and power tariffs, according to insider sources. import costs for essential commodities like petroleum products, coal, and liquefied natural gas (LNG).
The Ministry of Power, Energy and Mineral Resources (MPEMR) has engaged in discussions with Bangladesh Bank following the surge in the dollar rate, anticipating significant pressure on the economy.
State Minister Nasrul Hamid emphasized adjusting power tariffs multiple times a year to accommodate the increased dollar pricing and government subsidy reductions.
The prospect of more frequent tariff adjustments underscores the economic challenges posed by currency fluctuations and global market dynamics. Shafiqul Alam, an energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), predicts a surge in fuel import costs, potentially leading to tariff hikes for natural gas, electricity, and oils for domestic consumers.
The ramifications extend beyond the energy sector, affecting state-run entities like the Bangladesh Power Development Board (BPDB) and Petrobangla, grappling with substantial debts to international suppliers. The government’s efforts to transition the power sector away from subsidies align with conditions set by the International Monetary Fund (IMF) as part of its lending package.
Despite ongoing subsidy reduction efforts, the IMF emphasizes the need for Bangladesh to explore gradual subsidy reductions while expanding social protection schemes.
The country’s commitment to fiscal reforms is underscored by its engagement with multilateral donors and efforts to address energy sector vulnerabilities exacerbated by global price shocks.
