As the world struggles to pull the economy back on track from the effect of coronavirus through extraordinary measures, Bangladesh has also joined the quest by pumping money into the economy to tide over the crisis mainly through monetary measures.
But the big question is if that is enough to salvage the economy from the uncontrollable tumble that has started which is likely to have a domino effect across the table.
The Bangladesh Bank is trying a number of necessary steps such as cuts in repo rate and banks' mandatory requirement to park money with the central bank. It has allowed banks to sell their treasury bills ahead of maturity. The banks can as well defer classification of loans which the borrowers will not be able to repay on time until June.
These are mostly monetary measures, except the last one. But as history shows, this is an extraordinary time requiring extraordinary efforts, as the old refrain goes. It is not a financial meltdown. The economy is in the thrall of a virus pandemic the likes of which the world has not seen since the Spanish flu.
And so the world is working through three policies: making sure money flows smoothly through banks with measures like what the Bangladesh Bank has taken; steps to help companies bear fixed costs such as rents and taxes about which Bangladesh has yet to do anything; and lastly measures to protect the workers, many of whom have gone jobless, and here again Bangladesh is yet to act.
The first step Bangladesh has taken well. But the economy has to have an appetite to guzzle cash, otherwise stuffing banks with cash will not have any effect. For the last few months, we have seen private credit fizzling out, a clear signal that Corporate Bangladesh does not want to be bold about expansion.
So far, our growth has been powered by government spending and so more funds could be diverted there. But the big projects are unlikely to see any headway until the virus runs its full course. And nobody has an idea when that end line will come. An optimistic view as offered by virologists is the next three months with all efforts employed. But the virus will not really be tamed for probably many years and it may come back with renewed vigour.
But questions remain about the second and third kind of interventions.
The virus has damaged businesses, both small and big, severely. The apparel industry is looking at the bleak scene of over $2 billion in orders cancellations. The backward linkage industry is in an appalling shape, many of them have no idea why they are still open and do not know how they will pay salary if they close down or what will happen to their debts.
They have however been given the moratorium on their loans remaining unpaid for. Even if they cannot make any repayment until June, their loans will not be dubbed as classified. A big relief indeed, although, much more will be needed if the industries have to stand straight again.
Singapore plans corporate tax breaks, rental and tax rebates for commercial property. Italy offers tax credits to firms that experience a 25 percent drop in turnover. China has asked land owners to cut rents and is giving subsidies to private landlords.
The UK has announced a deferment in payment of sales tax for the next quarter to the end of June, which is a cash injection for firms worth 30 billion pounds or 1.5 percent of GDP.
But what about our small businesses that are all in tatters? The restaurants are closed. The Uber drivers are sitting idle. The shoemakers are just looking at the empty streets waiting for the long gone footsteps. And yet nothing has been chucked their way. Many, if not most, of them do not have access to any organised credit system. They survive on their own reserves or on informal loans. The moratorium on loans simply is not for them.
How will they pay wages to their workers when nothing is selling? Maybe we can emulate Korea by giving cash to small firms struggling to pay wages.
And finally the third kind of measures: the financial support to the waged workers who have lost livelihood. Or going even a step further, how to protect their jobs in the time of coronavirus.
China has cut social security contributions. Japan will subsidise wages of those forced to go off work and planning a package that involves issuing cash and gift certificates to the public, and even subsidizing travel expenses. Singapore will give cash grants for employers of affected workers.
The UK has announced an unprecedented stimulus plan to cushion the economic blow from the coronavirus, including paying a portion of citizens' wages for the first time in the nation's history. Firms of any size or nonprofits can apply for a grant for up to 80 percent of salaries of retained workers up to a total of 2,500 pounds ($2,900) a month. It has also offered unlimited 12-month, interest-free loans for businesses.
And even the US, with all its hawkish disregard for the private individual, has announced an economic relief package that would send checks of up to $1,200 to taxpayers who earn less than $99,000 a year.
The big question for us is, do we have the financial muscle to take on strong steps like these? Do we have the fiscal space to accommodate such policies?
So far the answer does not inspire confidence. All these measures will put a strain on finances. Bangladesh is today caught between the jaws of low revenue collection, which is likely to fall much shorter of the target because of coronavirus, and high spending ambitious projects, some of which carrying weak logic for implementation.
The resultant is the very limited fiscal space we are left with today. Even then, the government must sit down with its ledgers and find the bits and pieces to put up a fiscal and financial battle.
As we said, an exceptional time needs exceptional measures, the government may set up a reconstruction commission to find a way out.