CNI Desk: Amid coronavirus crisis, the government has taken up a comprehensive plan with four main strategies discouraging luxury expenditures and prioritizing government spending that creates jobs.
“We have taken a comprehensive plan to overcome the possible negative impacts of the pandemic on our economy and people,” Finance Minister AHM Mustafa Kamal said while placing the proposed budget for the fiscal year 2020-2021.
Under this plan, he said, they have taken measures that were necessary in the immediate term and implementing some in the medium term.
“We have also taken up a range of initiatives that will be implemented in the longer term to achieve full economic recovery,” said the Finance Minister.
Due to sound macro-fiscal operation by the government during the last ten years, the Minister said, the Debt-to-GDP ratio is still as low as 34 percent.
This provides a cushion against any negative macroeconomic implication while they are increasing public spending to overcome the crisis.
“Secondly, we are creating loan facilities through commercial banks at subsidised interest rates for the affected industries and businesses so that they can revive their economic activities and maintain competitiveness at home and abroad,” said the Finance Minister.
The third strategy is to expand the coverage of the government’s social safety net programmes to protect the extreme poor and low paid workers of five informal sectors from the sudden loss of their source of earning due to the pandemic.
“Finally, we will increase money supply to the economy while making a delicate balance between increased money supply and possible inflationary pressure,” said the Finance Minister in his budget speech.
In light of the comprehensive plan and strategies described above, he said the government has declared a number of stimulus packages to support the emergency healthcare services, to protect jobs and to achieve smooth economic recovery.
Economic Recovery Packages
The economic recovery packages declared so far have totaled Tk. 1,03,117 crore, said the Finance Minister.
Amid this unprecedented global crisis, the Finance Minister said Prime Minister has announced a number of stimulus packages totaling over Tk. 1 lakh crore to stand by the poor and helpless people, to keep up the momentum in economic activities, and bring back the trend in growth and development.
These are akin to the bold steps she took to save the country during the Asian Financial Crisis in 1997 and the Global Recession in 2009, he said.
The fiscal and financial packages announced by the Prime Minister is equivalent to 3.7 percent of GDP, which is the largest in the South Asia region.
The Economist, a London-based weekly, has published on 2nd May 2020 a list of 66 emerging stable economies ranking them according to four measures of financial strengths, namely public debt as a percentage of GDP, total foreign debt, costs of borrowing and foreign exchange reserves, and Bangladesh was ranked 9th from the top.
“Their estimate reflects our stronger position compared to most of the other emerging countries, and we thank Almighty Allah for that,” said the Finance Minister.
At the onset of the coronavirus pandemic, there was a drastic fall in demand in the United States and European market and as a result, export orders to our export sectors including the readymade garments began to witness cancellation and postponements.
This threatened the jobs of about 5 million workers in our export oriented industries.
“To tackle this crisis, we have created a fund amounting Tk. 5,000 crore for the export oriented industries so that they can continue to pay salaries and allowances to their workers and employees,” said the Finance Minister.
This quick action from the government has saved jobs of a large number of workers and employees, he said.
The partial shutdown in effect in the country since late March to contain the spread of the coronavirus resulted in massive slowdown in our economic activities.
“Given this context, in our bid to provide much needed support to the affected enterprises in the industrial sector, we have introduced a working capital loan facility of Tk. 30,000 crore at a subsidised interest rate for large industries,” said Minister Kamal.
For the same reason, he said, the government has created another working capital loan facility of Tk. 20,000 crore at a subsidised interest rate for the Cottage, Micro, Small and Medium Enterprises (CMSMEs).
To facilitate the import of raw materials under the Back-to-back 6 Letter of Credit facility, the government has increased the size of Export Development Fund (EDF) from USD 3.5 billion to USD 5 billion, at a reduced interest rate.
“To improve our export competitiveness by financing the pre-shipment expenses of exporters, a new Pre-Shipment Credit Refinance Scheme of Tk. 5,000 crore has been initiated through Bangladesh Bank,” he said.
The Finance Minister said they have introduced a special honorarium equal to the basic pay of two months for the doctors, nurses and other healthcare workers who are providing critical healthcare services to COVID-19 patients.
“We are aware of the fact that doctors, nurses and other healthcare workers providing healthcare services to COVID-19 patients and officials from field administration, law enforcing agencies and armed forces and other employees of public service directly engaged in enforcing government’s guidelines in this respect are at high risks of getting infected with the coronavirus and some of them have died,” he said.
The government suspended payment of interest for the months of April and May against loans distributed by all commercial banks.
Borrowers of such loans will not need to pay interest proportionately, and of the total interest of Tk. 16,549 crore, the government will give Tk. 2,000 crore as interest subsidy, said the Finance Minister.
Highest-ever Economic Growth
The Finance Minister said the year 2020 is very important in the national life.
The Birth Centenary of Bangabandhu Sheikh Mujibur Rahman, the greatest Bengali of all times, is being celebrated this year.
Most of the programmes scheduled to celebrate the Mujib-Borsho have been rearranged to avoid mass gathering during this COVID-19 pandemic and instead being organised through digital means.
The celebration will continue up to 17th March 2021.
The coming year 2021 will mark the Golden Jubilee of Bangladesh’s independence.
Programmes to celebrate these two glorious occasions will be carried out simultaneously.
“As we are celebrating the Birth Centenary of the Father of the Nation this year, and as it is an auspicious year for our nation, we were fully confident that this year we would achieve the highest ever economic growth,” Minister Kamal said.
He said the projection was to achieve growth in the range of 8.2 to 8.3 percent this year.
Kamal said all economic activities gathered a remarkable pace in the first eight months of the fiscal year, before being hit by the COVID-19 pandemic.
“All the media and think-tanks around the world were all in praise of our programmes and achievements. The Asian Development Bank made a forecast of 7.8 percent growth this year based on our performance in the first eight months. But unfortunately, all calculations about the global economy have been turned upside down under the impact of the COVID-19 global pandemic,” he said.
The International Monetary Fund (IMF) forecasted that the global economy will shrink by 3 percent in 2020, while the World Bank made a forecast that the GDP growth in the South Asia region would merely be in the range of 1.8 to 2.8 percent.
The World Trade Organisation (WTO) forecasted that global trade is likely to shrink by 13 to 20 percent in 2020.
According to International Labor Organisation (ILO), there will be a reduction of global jobs equivalent to about 195 million full-time workers.
UNCTAD is forecasting that the global flow in Foreign Direct Investment (FDI) will shrink by 5 to 15 percent in 2020. In addition, it is forecasted that due to the global lockdowns and the historic slump in oil prices, global remittance is likely to reduce by 20 percent.