Bangladesh faces the imperative to clear its electricity and fertilizer subsidy arrears within the next five years under conditions set by the International Monetary Fund (IMF) as part of a $4.7 billion loan program. The IMF’s recent Staff Report, following approval of the loan’s third tranche, emphasizes the government’s commitment to halt further accumulation of arrears and gradually settle existing debts transparently through budget allocations. As of March 2024, these arrears amount to approximately Tk25,000 crore for electricity subsidies and Tk15,000 crore for fertilizer subsidies, reflecting about 1% of GDP due to increased demands from independent power producers and fertilizer suppliers since fiscal year 2021-22. The IMF also recommends discontinuing the practice of issuing special bonds at below-market rates to commercial banks for clearing these debts.
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