What the Bangladesh Bank has done is absolutely right. The central bank has taken three measures under the expansionary monetary policy. Firstly, it has slashed the repo rate to 5.75 percent from 6 percent. As a result of this monetary measure, banks will be able to get loans from the central bank at a lower rate.
Secondly, it has reduced the cash reserve ratio by 50 basis points which would boost liquidity in the banking system.
Thirdly, the central bank has instructed all scheduled banks not to classify any loans till June 30 even if a borrower fails to repay. If this initiative was not taken, the banks would provision against outstanding loans. Thus, that amount would not come into money circulation. All those measures have been taken to enhance the supply of money in the market.
Apart from this, the central bank may ask all the banks to relax margin requirements for opening letters of credit to import daily essentials or necessary products meant for treating coronavirus. Moreover, the timeframe for margin payments for LCs can be extended to six months from the existing three months.
From the viewpoint of fiscal benefits, import duty on 12 goods has been reduced. More products can be brought under this net, which will help prices of those come down to some extent.
Besides, the government can sell necessary products in the market considering the interest of common people. A food-rationing scheme can be launched for the labourers who will lose their work as the government has enough stocks of food grains. It is claimed that the government has a stock of 17 lakh tonnes of food grains. Businesspeople have three lakh tonnes more. So, the government will not have to face any problem in adopting a food-rationing programme.
A special package can be declared for readymade garments and other export-oriented industries. For this, a fund can be built with support from the World Bank, the Asian Development Bank and the United Nations, from where affected entrepreneurs will get loans. The interest rate can be maximum 5 percent.
We can also take financial assistance from the Export Development Fund amounting to $3billion. Small and medium entrepreneurs should never be deprived of this loan facility. Past experience says the lion's share of all government the facilities always goes to well-established businesspeople.
The government can also adopt a "more comprehensive package" like other countries do. For example, the government has to give subsidies to launch a food-rationing scheme and open market sales. The government should think comprehensively about the impact of coronavirus that may linger for more time in Bangladesh and across the globe.
But a reduction in corporate tax similar to what Singapore did will not bring good results in Bangladesh. Because, many raise questions about how much corporate tax big manufacturing sectors pay. So, owners of readymade garment factories will certainly not demand a cut in corporate tax. They may seek a cut from the 0.25 percent advance income tax.
The government has to realise more to provide more support. So, it also needs to launch drives to rein in tax evasion and illicit money outflow. People will welcome such a move during this crisis.