COVID-19: PM Sheikh Hasina announces massive stimulus package for the economic recovery

Enamul Hafiz Latifee writes,

Prime Minister Sheikh Hasina yesterday, on 05 April 2020, unveiled the government work plan to overcome the possible COVID-19 impact on the country’s economy, declaring an allocation of Taka 72,750 crore under a set of stimulus packages. “Earlier I declared a Tk 5,000 crore (emergency) incentive package for paying salaries and allowances of export-oriented industries workers and employees and today I am announcing four fresh financial stimulus packages of Tk 67,750 crore,” she said.

In a nationwide televised address from her official Ganabhaban residence at yesterday’s morning, the premier said with the fresh allocations, the total amount of financial assistance would stand at Tk 72,750 crore, which is nearly 2.52 percent of Bangladesh’s Gross Domestic Product (GDP).

“I hope our economy will rebound and we could reach near the desired economic growth, if the stimulus packages, the previous and the fresh ones, could be quickly implemented,” she said. The premier said the government simultaneously took four programmes under the work plan to be implemented in phases categorized as “immediate, short and long”. “The four programmes are: increasing public expenditure, formulating a stimulus package, widening social safety net coverage and increasing monetary supply,” she said.

First Package

Highlighting the key aspects of the four new packages, the premier said the first of the four packages involved Taka 30,000 crore, to be provided to affected industries and service sector organizations as working capital through banks as low-interest loan.

She said the commercial banks would provide the amount as loans from their own funds to concerned industries and enterprises on the basis of bank-client relations. “The interest rate of this lending facility will be 9 percent, and the
concerned industries and business organisations will pay 4.50 percent interest, meaning half of the interest of that loan, while the government would pay remaining half to banks as subsidy,” she said.

Second Package

Sheikh Hasina said under the second package, small and medium enterprises (SMEs) including cottage industries would get Taka 20,000 crore as working capital. She said a mechanism would be devised to reach the amount to the SMEs as low-interest loans through banks which identically will disburse amounts to the SMEs on the basis of bank-client relations while the government in this case would bear the greater share of the interest amount. “The interest rate of this lending facility will be 9 percent and the concerned industries and business organisations will pay 4 percent interest of that loan, while the government will provide the remaining 5 percent as subsidy,” the premier said.

Third Package

The third package, she said, was meant for enhancing Bangladesh Bank’s Export Development Fund or EDF size from US$3.5 billion to $5billion to facilitate raw materials imports under back-to-back LC. The prime minister said this last package would result in adding an amount of additional Tk 12,750 crore equivalent to $1.5 billion to the EDF while its interest rate would simultaneously be brought down to 2 percent. The existing EDF interest rate is 2.73 percent in line with current London Interbank Offered Rate-LIBOR + 1.5 percent.

Fourth Package

The prime minister said under the fourth package, the central bank will introduce a new credit facility of Taka 5,000 crore as “Pre-shipment Credit Refinance Scheme” and its interest would be 7 percent. Sheikh Hasina said local products alongside the export sector would deserve special attentions and supports to cope with the possible global and domestic economic crisis caused by the pandemic. “In this regard, I call upon all to boost production of local products and raise their use,” she said.

The premier cautioned all concerned not to be indulged in any type of corruption, irregularity and misuse taking the opportunity of this crisis. “I want everybody to work with utmost sincerity and honesty. Taking the opportunity (of the crisis), don’t to be indulged in any type of corruption, irregularity and misuse and it’s my clear word,” Sheikh Hasina said. She continued: “If we can do work properly, the people of any section won’t endure any problem, and we’ve made this arrangement keeping this in mind.”

The prime minister mentioned that farmers, fishermen, weavers, blacksmiths, potters, small traders, and others who are involved in various businesses like poultry, dairy and fishing were worried about their loan and other bills
including electricity due to the present crisis evolved for the coronavirus pandemic. “But, we’ve taken various steps to remove their anxieties, and they don’t face any problem in future and continue their business smoothly,” she said. Sheikh Hasina went on saying: “I don’t want anybody to suffer and our responsibility is to mitigate hardship of all … we’ve announced the packages to achieve the goal and (I hope) everybody will get its results.”

The prime minister said as a nation the people of Bangladesh have a wonderful strength of patience and capability to rebound fast by enduring blows of any type. “Nothing could suppress us as a nation which snatched the independence in 1971 in only nine months responding to the call of Father of the Nation Bangabandhu Sheikh Mujibur Rahman and our aim is to advance further by containing the everlasting messages of the Father of the Nation in our hearts,” she said.

Finance Minister A H M Mustafa Kamal, Senior Secretary of Finance Ministry Abdur Rouf Talukder, Bangladesh Bank (BB) Governor Fazle Kabir also spoke at the press conference, moderated by PM’s Press Secretary Ihsanul Karim.

PM’s Principal Secretary Dr Ahmad Kaikaus and Prime Minister’s Office (PMO) Secretary Md Tofazzel Hossain Miah were also present, among others.

PM Sheikh Hasina elaborated the four programmes taken to cope with the possible economic impact on the country due to the coronavirus outbreak.

A) Increasing public expenditure: Generating employment will be basically given priority in public expenditure while foreign tours and lavish expenditure will be discouraged. Since the debt to GDP ratio of Bangladesh is much less (34%), so the higher public expenditure would not create any pressure on the macroeconomy of the country.

B) Formulating a stimulus package: Some low interest credit facilities will be launched through the banking system mainly to rejuvenate the economic activities, keeping the job of the workers and employees as well as the competitive edge of the entrepreneurs intact.

C) Widening the coverage of the social safety net: The coverage of our existing social safety net would be further widened to fulfill the basic needs of people living below the poverty line, day labourers and people who
are engaged in non-formal works. Under the third operation, she said, the notable programmes are distributing food materials free of cost, selling rice at Taka 10 per KG, distributing cash among targeted communities, widening the coverage of the old-age allowance, widow allowance and allowance for the women oppressed by husbands to cent percent at 100 most poverty-prone upazilas of the country. Other undertaken operations include speedy implementation of the programme to build houses for the homeless marking the birth centenary celebration of Father of the Nation Bangabandhu Sheikh Mujibur Rahman.

D) Increasing Monetary Supply: It is very much necessary to increase the monetary supply to overcome the adverse impact on the economy. Sheikh Hasina mentioned that the Bangladesh Bank has already reduced the CRR and REPO rate to boost the monetary supply which will continue in the future as per the necessity. “But, in this regard, our goal is that there will be no increase in inflation due to monetary supply,” she said.

The prime minister said the fast spread of the coronavirus, huge pressure on the health services, unprecedented lockdown and stagnant communication to curb the pandemic have already started putting negative impact on the global economy. “The sectors and areas which are being affected are: industries production, export trade, services sectors, especially tourism, aviation, and hospitality sector, small and medium enterprises and employments and these are experiencing a landslide fall,” she said.

Not only the supply side, she mentioned, the consumption and investment in demand are also witnessing downward.

Sheikh Hasina said the International Monetary Fund (IMF) has already declared that the global economic recession has started while the stock markets across the globe have witnessed a fall of 28-34 percent over the last few weeks.

Citing an estimation of the Organisation for Economic Co-operation and Development (OECD), she said the global growth could come down at 1.5 percent if the recession persists long while a huge workforce across the globe is
feared to lose their work. Sheikh Hasina said if the recession persists long, it is also apprehended that the world is likely to face a great economic recession for the first time after the World War II. She said time has not yet come to specifically mention what type of negative impact or what would be the impact of the novel coronavirus pandemic
on the country’s economy.

The prime minister also listed some of the impacts of the COVID-19 on the country’s economy which are as follows:

A) The import cost and export earnings in this fiscal year have witnessed a 5 percent fall compared to the same period of the last fiscal year, and this fall could further stretch at the end of the current fiscal year.

B) There is a possibility of not getting private investment at a desired level due to the delay in implementation of the ongoing mega projects, establishment of the economic zones and also delay in implementation of the decision to reduce the bank interest rates.-

C) The novel coronavirus will have a negative impact on the services sector, especially hotel-restaurants, transport and the aviation sectors.

D) Like other countries of the world, it will also have an adverse impact on the country’s capital market.

E) Due to the decline in global demand, the world fuel oil price has been reduced by over 50 percent for which the inward remittance flow is also being affected.

F) The Asian Development Bank (ADB) in their estimation said the economic loss of Bangladesh could extend up to $3.2 billion due to the impact of this deadly virus, but under the present circumstances, it is assumed that the extent of loss could be much more.

G) The purchasing capacity of the low-income people could be reduced as well as there could be disruption in the supply chain due to the long general holidays affecting the production of the SMEs and hindrance in the transport
services.

H) The overall revenue collection in the current fiscal year (FY20) is less compared to the budgetary target, and this could further increase the budget deficit at the end of the current fiscal year.

I) The driving forces for attaining over 7 percent growth on an average for three years and lastly 8.15 percent growth in FY19 were the strong domestic demand and supporting revenue and monetary policy. As a result, the GDP growth could be declined due to the negative trend of the macroeconomic indicators.

The prime minister said the World Health Organisation (WHO) has declared the novel coronavirus as a pandemic as the deadly disease has spread across the globe. “So far, 202 countries and territories have been affected by the disease, and over 70,000 people are being infected by it and more than 4,000 people die every day,” she said.

Sheikh Hasina said but by the grace of Allah and due to timely and proper steps of the government, coronavirus infections did not take place extensively yet in Bangladesh and the situation is under control here. “When the coronavirus outbreak began in China in December last year, we gave top priority to this issue,” she said.

The premier said the Diseases Control Unit of the Directorate General of Health Services (DGHS) and the Institute of Epidemiology Disease Control and Research (IEDCR) have jointly started work to this end. “A control room was opened at the IEDCR and we started preparation to tackle this disease,” Sheikh Hasina added. Besides, she said, separate control rooms were introduced at the Prime Minister’s Office (PMO) and the Health Ministry. “The overall situation of coronavirus is being monitored, and programmes are being carried out through these control rooms,” she said.

The prime minister said to contain the coronavirus and other contagious diseases, the government has adopted the National Preparedness and Response Plan for COVID-19, applying its experiences and following the guidelines of
the World Health Organization (WHO). Mentioning that three-tier programmes have been taken under the plan, Sheikh Hasina said the government is discouraging people to return home from abroad and go abroad to prevent the spread of the lethal disease.

The authorities concerned are also immediately identifying the home returnees infected with the virus to halt the person-to-person virus transmission, she said, adding the government is providing proper treatment to the people infected with coronavirus and patients.

Since January in 2020, Sheikh Hasina said, the three-tier programmes are being implemented. “All the returnees from abroad are being screened through thermal scanners and infrared thermometres at all airports, seaports and land ports,” she added.

The premier said steps have been taken to keep the people having COVID-19 symptoms and suspects in quarantines. “Measures have also been taken to distribute the health declaration and passenger-locating forms among the air
passengers before landing their flights,” she said. The premier said the passengers, who have no COVID-19 symptoms and are also not suspected, are advised to stay at home quarantines and “we ensure regular follow-up with them”.

She said a national committee, led by the health minister, has been formed involving representatives from different ministries, international agencies including WHO and professional bodies affiliated with healthcare. “Committees have also been constituted at divisional, district, upazila and union levels,” she added.

Sheikh Hasina said till yesterday, a total of 70 people were infected with coronavirus in Bangladesh while eight people died. “I pray for eternal peace of the departed souls,” she said. “Some 30 people returned home after recovery. And, those who died were in the 70s and they were suffering from various complicated diseases, although
we don’t expect any death,” Sheikh Hasina said.

To contain the infections of coronavirus globally, the premier said, lockdowns have been announced in different countries. “Apart from sealing off borders in more than 100 countries, flight landing has been suspended in
almost all countries of the world,” she added.

The prime minister said general holiday has been announced for 17 days in Bangladesh since March 26 last, while partial holiday has been declared in industries and factories.

“Tourist centres and shopping malls remain closed, and public transport services on roads, waterways and rail routes have been suspended and the people have been instructed to stay at their homes and maintain social distancing while going out of homes,” Sheikh Hasina said.

The prime minister urged the people to follow health codes properly and celebrate the Pohela Boishakh, the first day of Bangla New Year, by staying at homes. “The cultural functions on the occasion will be staged through media,” she said.

Mentioning that holy Shab-e-Barat is ahead, Sheikh Hasina called upon the countrymen to pray to Allah by staying at homes so that they (people) stay well and can advance further socioeconomically and the entire world is freed from the Covid-19 pandemic.

Addressing the press conference, Finance Minister AHM Mustafa Kamal said the Taka 72,750 crore stimulus package, announced by Prime Minister Sheikh Hasina, would facilitate all the businesses, industrialists, public and the private sectors to help recoup the possible damages of the country’s economy for coronavirus. “This package will help the businessmen, industrialists, the public and the private sectors to bring them back again on the road of dynamism,” he said. The finance minister expressed his firm belief that people from all sections of the country like farmers, potters, fishermen, teachers and people involved in the cottage industries and SMEs as well as in the hotel and restaurants would be benefitted from this package. “Our Prime Minister has brought all people of the country under this package. Country’s people won’t lose their hope and believe that we’ll come back to the normal situation again,” he said.

Kamal said based on her past experience, the prime minister announced this huge stimulus package before the deadly COVID-19 could take a toll on the country’s economy, adding that everybody is included in this package and none will be excluded. “I think that all our dangers will be gone away and once those are gone, we’ll have to act fast without taking much time to have a turnaround so that we can reach our desired goal,” he said.

The minister said since inflation is now hovering around 5.5 percent and the government could not go for adopting a contractionary policy, so the government would have to sit on the driving seat and would also have to pursue the fiscal and monetary policy in a flexible way. He also hoped that the GDP growth rate of the country would reach around 8 percent if the ongoing pandemic COVID-19 doesn’t persist long.

In this connection, he referred to the recent estimation of the Asian Development Bank (ADB) where the lending agency projected that the country’s GDP growth would reach 7.8 percent in FY20 if the economy continues its normal trend.

Highlighting the trend of some of the major macroeconomic indicators, Kamal said the revenue collection witnessed an 8.15 percent growth during this July-February period while the inward remittance flow was 20.05 percent highest during the timeframe compared to the same period of the last year. He, however, noted that the export earnings notched a 4.8 percent negative growth during this July-February period due to slight fall in the performance of the RMG sector.

Extending his heartfelt thanks to the prime minister for announcing this huge package, Kamal said it was Prime Minister Sheikh Hasina who awarded the first stimulus package before the nation in 1997 when the South-East Asia
faced a financial debacle. Again after assumption of his office in 2009, Kamal said Sheikh Hasina also delivered a stimulus package before the nation to help overcome the global economic recession. “During that time, Bangladesh had set an example before the whole of the world,” he said, adding that the prime minister rightly announced the stimulus package this time perceiving the context.

Explaining the stimulus package announced by Prime Minister Sheikh Hasina, Bangladesh Bank (BB) Governor Fazle Kabir said it will help the country’s economy overcome the impact of COVID-19 and achieve the desired growth.

Referring to the BB’s different initiative, he said the central bank has taken different programmes to prevent any unwanted liquidity obstruction in the banking sector due to coronavirus outbreak. As per the moves, he said, the central bank has increased the allocation of some re-financing schemes for ensuring smooth money flow to different sub-sectors of the liquidity economy. The size of Export Development Fund (EDF) has increased to US$5 billion from $3.5 billion while the interest rate of the fund would be 2 percent from the existing 2.73 percent, he added.

The BB governor informed that the central bank has re-fixed the cash reserve ratio (CRR) at 5 percent on bi-weekly average from April 1. BB has also cut repo rate to 5.75 percent from 6 percent as part of efforts to boost liquidity amid COVID-19 pandemic, he added.

He said banking activities are also remaining open in limited scale to facilitate financial transactions for the people during the general holidays declared by the government. Fazle Kabir said the central bank has also kept open the Bangladesh Automated Clearing House (BACH) to complete the inter-bank transactions for ensuring various emergency services, including smooth supply of essential commodities, emergency medicine and other services, for the people.

While speaking at the press conference, Finance Division Secretary Abdur Rouf Talukder said they have made the groundwork for preparing this stimulus package integrating the fiscal and monetary policy as directed by the prime minister to face this unprecedented situation. About the announced Taka 30,000 crore credit facility, he said normally a recipient repaid his loan taken as working capital in four to six months.

Rouf said if the banks could manage this fund efficiently and the loan recipients repay their loans in due time, then it would be possible to lend up-to Taka 60,000 crore in two phases in a year from this announced Taka 30,000 crore credit facility.

The finance division secretary also opined that it would be possible to give loan facility of over Taka 1,35,000 crore from the stimulus package announced by the Prime Minister.

Since the commercial banks will bear the credit risk, Rouf said there would be no moral hazard while the quality of the credit would be improved which would eventually help improve the economic situation of the country.