IMF sets June 2013 deadline for Bangladesh to implement domestic oil pricing reforms
Bangladesh has to implement its domestic fuel pricing reforms by June 2013 if it is to receive the remaining $705 million from a total $987 million loan it is seeking from the International Monetary Fund under an Extended Credit Facility agreement, a senior finance ministry official said Monday.
Under the deal with the IMF signed in April this year, Bangladesh was to introduce a number of reforms including adjusting fuel prices in accordance to the international oil markets, in return for a $987 million three-year loan. The loan was to be disbursed in seven equal tranches of $141 million each, and could be repaid within 10 years with no interest charged, Platts has reported.
The IMF released the first $141 million tranche in April, and agreed to release the second tranche in January after delaying it by two months from November, as Bangladesh had failed to carry out the key reforms, Platts reported last week.
An IMF team led by David Cowen, Deputy Divisional Chief for Asia and Pacific Department of the IMF, set the June 2013 deadline last Thursday.
A price adjustment formula for oil products in the domestic market was one of the key requirements for the loan, and the Bangladesh government had planned to implement this by December 2012, Platts has reported.
This, however, was delayed amid public protests recently, the ministry official said Monday. The government, though, has framed the adjustment policy already. “We have already decided to adjust fuel prices in line with the international market,” the finance minister AMA Muhith said last Thursday.
Bangladesh currently changes domestic fuel prices through government executive order.
State-owned Bangladesh Petroleum Corporation, or BPC, purchases oil products from the international market and sells them at lower rates in the domestic market, resulting in significant losses.
The IMF and World Bank have long called on Bangladesh to fix its domestic oil pricing policy to better reflect movements in international oil markets. The country last raised oil prices by up to 43% in 2011 via four hikes.