BD asks IMF to appoint consultant to assist power sector reform

The government has requested the International Monetary Fund (IMF) to appoint a consultant to assist in implementing a "three-year (FY26-FY28) reform plan" in the power sector to cut subsidies by Tk 25,000 crore in the upcoming fiscal year, reducing it from the current Tk 62, 000 crore to narrow the gap between electricity generation costs and retail prices.

The Power Division official made the request during the first day of the meeting held on Wednesday while the officials briefed the IMF on reform measures undertaken over the past nine months to reduce subsidies and improve financial efficiency in the sector.

An IMF team is currently in Dhaka to assess the progress of reforms and discuss the disbursement of the fourth and fifth tranches of a $4.7 billion loan agreement. 

Meanwhile, the Power Division has requested the finance ministry to convert a Tk56,600 crore debt into subsidy, an amount Bangladesh Power Development Board (PDB) incurred from purchasing electricity at high prices from private rental, quick rental, and independent power producers (IPPs).

It argues that the enormous debt, comprising a principal amount of Tk43,160 crore and Tk13,439 crore in interest at a 3 per cent rate, is undermining its credibility with international lenders and stakeholders.

"We aim to significantly reduce the gap between generation costs and consumer tariffs… but there are no plans to increase electricity prices at this stage," a senior official said ahead of the IMF team's visit.

"We expect the IMF to submit a proposal on the power sector roadmap during the visit," another Power Division official said, reiterating that no immediate price hikes are on the table.

Welcoming the step, Professor M Tamim, an energy sector expert and Vice-Chancellor of Independent University, Bangladesh (IUB), welcomed the reforms. "The focus on internal improvements is a timely move and will help maintain tariff stability," he said.

Currently, the bulk tariff of electricity is Tk 7.04 per kilowatt-hour, while the supply cost is Tk 12.15. The retail tariff at the consumer level is Tk 8.95 per kilowatt-hour, with an additional 20 percent demand charge and various other fees.

However, to face the IMF team, Bangladesh Power Development Board has taken nine cost-saving initiatives  including revising the coal pricing formula with Adani Power, and three joint-venture coal-fired power plants-Bangladesh-India Friendship Power Company, Bangladesh-China Power Company, and RPCL-Norinco Power Plant-have been instructed to review inconsistencies in their Power Purchase Agreements (PPAs) to enhance transparency and accountability.

Moreover, 23 state-run power plants under entities such as NWPGCL, APSCL, EGCB, RPCL, and BRPL have been asked to reassess their PPAs.

In total, the government expects to save Tk 140 crore in FY2026 through these reforms, according to the Power Division.

"We've already outlined our reform progress in preparatory discussions ahead of the IMF's arrival," the official added.

Power and Energy Adviser Muhammad Fauzul Kabir Khan earlier reaffirmed the government's commitment to reducing the subsidy burden through improved internal management and structural reforms.

The Power Division plans to phase out substantial subsidies within two years-without raising tariffs in the immediate term. However, a price hike may become necessary in FY2027, depending on production costs and policy decisions by the incoming government.

"There are also discussions about introducing area-based electricity pricing-where higher-income areas like Gulshan, Banani, and Dhanmondi could face higher rates," another official said on condition of anonymity.