One of the biggest areas of concern of this year was the world economy that has been hit particularly hard by the on-going pandemic. While the economies were reeling from the shock, a significant amount of measures were taken across the world to deal with the predicament.
Likewise, the government of Bangladesh has announced a number of stimulus packages while the central bank took a few initiatives to help fight the unprecedented economic challenges.
The economic recovery plan - worth Tk121,353 crore representing 4.34% of the national GDP - consists of 21 distinct packages for different sectors and beneficiaries. It was announced in phases from March to June, where the banking sector of the country was made responsible to distribute them under the guidance of Bangladesh Bank circulars.
On 25 March, Prime Minister Sheikh Hasina announced a Tk5,000 crore (emergency) incentive package for export-oriented industries to pay the salaries of the employees and workers. The fund was loaned to companies at 2% interest, which must be paid within 2 years with a grace period of six months.
On 5th April, the premier announced the second phase of a stimulus package worth Tk67,750 crore. This was made to support four programs – increasing public expenditure, formulating a stimulus package, widening social safety net coverage and increasing monetary supply - planned to be implemented in phases categorized as "immediate, short and long."
The following is a rundown of allocations under the bailout plan:
- Tk40,000 crore was provided to affected industries and service sector organizations as working capital through banks at 9 percent interest rate. Here, the government will provide 4.5 percent as an interest subsidy.
- Tk20,000 crore for small and medium enterprises, including cottage industries, as working capital at 9 percent interest rate, and the government will give 5 percent interest subsidy.
- Tk12,750 crore was allocated under the Export Development Fund (EDF) of Bangladesh Bank to facilitate raw materials imports under back-to-back Letter of Credit. The interest rate here has been reduced to 2 percent from 2.73 percent.
- Tk5,000 crore as "Pre-shipment Credit Refinance Scheme" and its interest would be 7 percent.
- Tk100 crore for special honorarium for government doctors and health workers treating COVID-19 patients.
- Tk750 crore to provide health insurance for government employees and frontline fighters working at risk.
- Tk2,000 crore credit Risk Sharing Scheme for SME sector
- Tk5,000 crore special refinancing scheme for agriculture at 5 percent interest
- Tk9,500 crore for agricultural subsidy
- Tk3,220 crore to speed up mechanized farming
- Tk860 crore to ensure rice market stability and fair price
- Tk3,000 crore refinancing loans for farmers and small traders
- Tk2,130 crore allocated under a housing scheme for the homeless
- Tk815 crore for expanding Social Safety Net Programmes
- Tk1,258 crore cash disbursement to people (50 lakh families) living under extreme poverty
- Tk2,500 free food aid for 2.54 crore beneficiaries
- Tk770 crore for the Tk10 per kg open market sale operation
- Tk2,000 crore subsidy for exempting partial interest of loans of commercial banks
- Tk3,200 crore for Employment Generation Scheme
- Tk1,500 crore to ensure social safety of unemployed RMG ,rawhide and footwear industry workers.
As a part of cautionary measures, the government has decided that 25 percent of budgetary allocations for development projects will be put on hold, affecting low-priority projects, while also approaching international financial institutions and bilateral development partners seeking budget support.
The country is expecting $ 2.6 billion in loans as emergency budget support from five development partners to tackle the Covid-19 situation. The details of the support are as follows:
- World Bank: $ 850 million
- International Monetary Fund (IMF): $ 750 million
- Asian Development Bank (ADB): $ 600 million
- Asian Infrastructure Investment Bank (AIIB): $ 250 million
- Islamic Development Bank (IsDB): $ 150 million