Most subsidy goes to the rich: Ahsan Mansur

The leading economist shares his take on the fraught issue of subsidies on the inaugural episode of’s “Inside Out”

Published : 5 March 2023, 07:10 AM
Updated : 5 March 2023, 01:53 PM

Most of the subsidies provided by the government for energy prices go to the rich, leading economist Ahsan H Mansur said, as he concurred with the International Monetary Fund’s stance on the subject that sparks mixed reactions in Bangladesh.

Mansur shared his take on the fraught issue on the inaugural episode of’s “Inside Out” as he joined the live show on Sunday to discuss the state of the Bangladesh economy.

The government is expected to pass the burden of higher global prices on to users in line with the market.

Mansur’s view mirrors the IMF’s prescription for the government to scale down energy subsidies to unlock funds for the poor under a $4.7 billion loan agreement with the multilateral agency.

“Most of it goes to the rich people,” he said. “Who uses the most electricity? It’s the rich. Who uses piped gas in Bangladesh? In their ovens? It’s the rich. The rest of Bangladesh is depending on LPG, which is fluctuating every week and it is functioning fine. No one is blaming anybody. Why does the government take this blame by keeping it fixed?”

The result is a massive subsidy bill that makes it difficult for the government to manoeuvre economically and politically, said Mansur, executive director of the Dhaka-based Policy Research Institute and a former IMF economist.

“What do we have at the end? We’ve got a huge subsidy bill, thousands of crores of accumulated, unpaid bills of the Power Development Board. They couldn’t pay the vendors, they couldn’t pay the IPPs. That’s on our government.”

“And they’re getting the political blame because the price shock is too much. The sticker shock almost makes you faint. The government is getting bad deals on both ends. What for? Had they adjusted the prices slowly, that accumulation of arrears would not have happened.”

The government should have “let things happen in a slow and steady way” following the global market conditions and could try and explain the subsidy situation to the people in a clearer way, he said.

“The government has no responsibility to pay for your bills. I believe that. Why should the government pay bills for you and me? The government should pass it on to me because I am the user of electricity, I am the user of petroleum, and I am the user of diesel. I should pay.”

He pointed to a similar mindset among policymakers on fixing exchange rates and other economic variables.

Bangladesh had kept its exchange rate stable for about 10 years since 2012, he said. There was a cumulative effect. Prices, like the price of energy, were also fixed for about two years.

“Then when the changes came, they were too big. The exchange rate we had to devalue by 25 percent. Gas prices, for example, we had to increase from Tk 10 to Tk 30 – huge! A 200 percent increase in gas prices. So, the shock is too much in one instance.”

“Had the shock been distributed over the last four or five years or 10 years, it would have been incremental and the economy would have adjusted and acclimatised. Like suddenly moving from hot weather to a cold room. Of course, I’ll feel cold. Our situation is like that. We have been subjected to extreme shock.”

Asked why Bangladesh was so reluctant to maintain economic flexibility, Mansur said: “This is my own opinion, but I believe our policymakers believe they can fix things in their own way. They fix the exchange rate, fix the prices of electricity. Put a floor on stock market prices, fix the interest rate. All kinds of fixing. The real world doesn’t work like that. The rest of the world is flexible. Every day it’s moving.”


Asked if Bangladesh should worry about spiralling into an economic crisis like regional counterparts Sri Lanka and Pakistan, the economist advised ‘caution’ and ‘prudence' rather than concern.

He attributed Sri Lanka's economic collapse primarily to corruption and warned that Bangladesh faces a similar problem. In addition, the South Asian nation has seen its foreign exchange reserves drop markedly amid rampant inflation. Therefore, Bangladesh must be ‘cautious’, he said.

Mansur highlighted the need for the government to follow the IMF's recommendations and revamp the banking sector to strengthen the economy. He also flagged concerns about non-performing loans as banks are essentially being 'robbed' by defaulting borrowers.

As a result, people are wary of keeping their money in more than one bank, according to the economist. “You can’t blame the people.”

To mitigate the concerns surrounding the banking sector, the government must enforce regulations and ensure accountability, Mansur said. He suggested the formation of a ‘committee’ to support the economy and the banking sector.

Addressing the challenges in maintaining a continuous flow of money in the economy, Mansur believes it will be difficult to combat laundering as funds gained illegally through corruption or extortion are bound to be funnelled out of the country.

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