Time will tell how much the incentive package announced by the prime minister will help in reviving the economy from the onslaught of the coronavirus pandemic.
A big incentive is necessary in the present situation, and so I welcome the package. But the question is where the money will come from.
The incentive money may be disbursed from the banks' own funds. But do banks have that much surplus liquidity?
The growth in bank deposits has been declining for a long time. Because of the impact of coronavirus, there is overall uncertainty and a stagnation in economic activities in the country. There is a risk of deposits falling further due to this.
Banks will not be able to provide loans if they do not get deposits. So, it remains to be seen how far the incentive package can be implemented. However, if everything goes well, the package will help to revive the economy.
The prime minister said actions will be taken if the incentive package is not implemented properly. That means there is some apprehension over the package not being implemented properly. People will have to keep an eye on that.
There are also some risks in disbursing the incentive credit on the basis of the bank's relationship with customers. The big businessmen, who have good relations with the banks, may get a bigger portion of the loans. The money may also go to those who are already defaulters.
In sum, there are a number of challenges in implementing the incentive package. The government must monitor all these issues.
Dr AB Mirza Azizul Islam is former finance adviser to the caretaker government