AKM Asaduzzaman Patwary,
Additional Secretary (R&D), DCCI
The outbreak of the Coronavirus has turned into a pandemic and spread across all corners of the world. Around 784381 people are infected and death toll is on the rise hitting 37780 till end of March. This deadly outbreak has confined more than 2 billion of people across the world. It is worth mentioning that this deadly virus has seriously threatened our human civilization and human kind and worldwide people are fighting against this outbreak. Alongside the threat to the human civilization, the global economy is at danger since global supply chain system of goods, services trade, supply chain of production, high street trade and human mobility are badly disrupted over the last couple of months. Initially, the outbreak and crisis kicked off in China and people perceived that it would be limited to China and economic damage would be limited to China and countries which are extremely dependent on China to the some extent like the USA, Japan, Hong Kong and Vietnam but it hardly spared any country. Bangladesh is not safe and immune from this impact. But, irony is that within shortest span of time, this pandemic also infected Bangladesh and grasped our trade and regular industrial operation and other economic activities. The severity of this outbreak has become so acute that world economy perceives to receive a serious blow of recession and this recession would be more damaging and harmful than any other previous recessions experienced by the world. The recession in 2008 and 1930 were more about economic consequence driven and this upcoming recession is economic, public health danger driven and very enormous. In previous recessions, world has not faced the lockdown but this time the power house of world economy and almost all developed and developing countries are severely confined and locked. Almost 199 countries are suffering from the common challenge with human kind. This outbreak has also triggered slump of travel and hospitability industry, limiting retail business, shrinking demand for products & services and impacting jobs. Meanwhile, UNCTAD estimated global growth would slow down by 1.5 percent in 2020. IMF predicted that world GDP will be hit to 2 percent and even lower. ILO warns that about 25 million jobs could be lost worldwide due to coronavirus outbreak. World Bank predicts off late only East Asia will face 120 million job loss. According to different assessment of international agencies that Bangladesh economy may contract by as much as 1.1% equivalent to $3.02 billion in the worst-case scenario of outbreak of coronavirus in the country in early assessment. And, Economist predicts GDP of Bangladesh may end up with 3.3% this year. Taking into account the limitless severity and recent trend of outbreak into account, the economic loss and damage across all sector would be incredibly higher than previous estimation. Meanwhile, our cross-border trade has been affected and to some extent shut. The major export oriented industries are going face adversity as the export order is being suspended and import received negative trend. Our export and import already hits double digit negative growth in March though growth recorded negative from February. The economy of Bangladesh has already experienced a disruption of supply chain of RMG industry, Leather and Pharmaceutical Industry and other allied micro, small, medium and large sector due to this alarming outbreak. As a result, our financial sector, capital market and micro, small and medium business and large business base of all sectors in the country have been raged and hindered as bolt from the blue. Our informal sector is almost 25% of economy and aligned with private sector led growth.
Bangladesh has been undergoing the economic transition in the recent years and private sector plays critical roles in this process. And, safety and pro private sector economic environment is essential and private sector lifeline has been affected meanwhile. The lifeline needs to be supported and privileged to overcome this situation. It is perceived that this geo-economic crisis needs some preparedness and some focused and relevant course of actions in form of fiscal and non-fiscal policy measures and recommendations. The consistent economic growth achieved in Bangladesh will be affected and the massive growth fall needs to be tackled in the current situation. Bangladesh, with the limited financial resources, may face some difficulties as meanwhile fiscal revenue collection stream of Government has become slim and limited in country industrial and business operations also aggravated and weakened this situation. Therefore, taking the realistic perspective of Government state and private sector needs, some timely and inclusive efforts are to be made and jointly to be addressed through shared effort to deal the upcoming economic upheaval. We feel that the crisis management abilities and economic capacities can overcome any situation and effectiveness and gravity of our efforts and endeavors can reduce the prolonging of the economic downturn. The precise and indicative policy points are given below to keep economic effects low and manageable.
- Emergency Fund with zero interest using foreign exchange reserve or International agency backed fund to support the financially stressed businesses for paying salary of their workforce and be accessible by informal and formal sector SMEs.
- Bangladesh Bank can also waive bank interest of affected export oriented manufacturing and local SME across all sectors for next 1 year.
- To ensure liquidity in banking sector, Bangladesh Bank may relax the threshold of Cash Reserve Ratio (CRR) for next six months as well as the call money rate need to be increased.
- ‘Low Cost MSMEs Financing Facility’ can be created linking with existing Refinancing Scheme of Bangladesh Bank and refinancing interest rate needs to be minimum and repayment time and grace time of these MSMEs can be rationally extended.
- Minimum CD, AT and VAT for both import and local stages including food and essentials items, health safety instruments and export oriented manufacturing industry for next 1 year which will help businesses to turn-around support their production and trade process.
- Almost all countries are in deep economic crisis, therefore fiscal support and grant may not be easy to receive. That is why, we need to stand on our own and find home grown and low cost solutions to address this crisis.
- Since impact of coronavirus is elaborate and massive, Government may seek emergency financing facilities of IMF, ADB and the World Bank to benefit from their schemes for traders, manufacturers which are low cost and easily accessible. Government interest against debt payment of ODA and G2G schemes from different financing agencies can be relaxed for next 1 year.
- Bangladesh may not be able to provide huge bailout package likewise developed countries due to our fiscal limitations however efforts, strategic guidance and intention to extend rational fiscal support may help to recover the crisis.
- Health economy and public health expenditure need to be increased so that all people get low cost and quality health service guaranteed to fight against this virus.
- Informal sector accounts for large share of the economic operations like unregistered floating traders, shops, micro and small service business, industry insiders are affected heavily and this informal sector dependent employment are also largely lost. And, this informal sector can be brought under the social safety net.
- Local domestic market of essential consumable and usable commodities market need to be strictly monitored and controlled for keeping the consumption supply chain uninterrupted and stable otherwise hyperinflation due to limited supply chain system may soak both and hurt our economic balance.
- Upcoming Fiscal budget of Government can be deficit budget to cover the economic loss and shield all sectors of economy and deficit amount may be higher for the time being.
- More policy liberalization should be offered in foreign investment and for tariff and non-tariff aspects and encourage manufacturing investment.
- Private sector needs to be committed and firm to support and pay back the government in the upcoming years so that government get some fiscal leverage to sustain key national level infrastructure development projects under annual development programme with greater economic importance as these projects are instrumental to keep our economy and private sector moving and sustaining in near future.
- Energy sector subsidy in any form can be ensured as liquid fuel and gas price is extremely lowest across the world and more import need to be done.
These initiatives, if implemented, could be win-win for both private and public sector as these moves could reduce fiscal burden of business community and Government to some extent. These sort of fiscal stimuli will ensure and guarantee welfare of the large section of private sector trade and business community at the expense of government fund and government is expected to work for the welfare and betterment of mass people with as the principle and ideology of mass welfare of the Government. This mass and private sector friendly initiatives will pay back in return to the Government in form of revenue collection, stable industrial, trade, investment and economic health in the near future once both the country and world economy return to the stability with positive ripple effects in the economy in near future. We also feel consideration of these recovery suggestions enable private sector and public sector to overcome the global crisis.