Government stimulus fund: Stimulus size expansion, tenure extension in the offing | The Business Standard
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Stimulus size expansion, tenure extension in the offing

Economy

Abul Kashem
29 December, 2020, 10:10 pm
Last modified: 30 December, 2020, 12:52 pm

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Stimulus size expansion, tenure extension in the offing

New stimulus plan to be finalised by mid-January

Abul Kashem
29 December, 2020, 10:10 pm
Last modified: 30 December, 2020, 12:52 pm
Photo: TBS/Salahuddin Ahmed
Photo: TBS/Salahuddin Ahmed

The government is planning to create another stimulus fund of Tk10,000 crore to pay wages and allowances to workers in export-oriented industries, including the apparel sector, for the next four months, as part of its measures to tackle a possible second wave of Covid-19.

Moreover, the finance ministry has begun to work on expanding funds under the existing bailout packages and extending their implementation time after assessment.

Prime Minister Sheikh Hasina has recently directed the finance ministry to come up with a new incentive plan to deal with effects of the Covid-19 second wave.

Md Azizul Alam, additional secretary to the ministry (macroeconomics), told The Business Standard, "We have started working on the prime minister's instructions. Discussions are underway. But, the new plan has not been finalised yet."

The plan will be finalised by mid-January, officials at the Finance Division said.

After the Covid-19 had made inroads into the country in March, the government announced 21 stimulus packages to the tune of Tk121,353 crore for people of different walks of life, including farmers, labourers and small and big entrepreneurs.

The terms and conditions of the new Tk10,000 crore stimulus package will be the same as before, according to Finance Division officials.

The ongoing pause on loan repayments and suspension of loan classification might be extended to March next year from 31 December this year, considering the situation. When this deferment facility ends, borrowers will be given rescheduling facilities for repayments on easy terms.

Some Tk10,000 crore was added to the Tk30,000 crore package announced for large industries and services. At the end of October, Tk28,338 crore was disbursed from this fund.

Although some large business groups have borrowed large sums of loans from this fund at low-interest rates, many organisations have not received any assistance from the fund.

Moreover, many exporters have been burdened with back-to-back Letters of Credit (LC) liabilities in the wake of cancellation and suspension of export orders.

Considering all these issues, the size of the fund is likely to be increased, finance ministry officials said.

The Tk20,000 crore package announced for the cottage, micro, small and medium enterprises (CMSMEs), might witness an extension to its implementation time without an increase in its fund size because disbursements from this package through banks have been very unsatisfactory.

Moreover, a separate package of Tk8,000 crore is being prepared for disbursements through the Microcredit Regulatory Authority's certified microfinance institutions.

The Palli Karma-Sahayak Foundation (PKSF), Bangladesh NGO Foundation, and Bangladesh Social Development Foundation – which are working to ensure working capital supply to grassroots entrepreneurs – may get reallocations in the revised budget for the current fiscal year. The money will be disbursed as loans to create employment for small entrepreneurs at the village level.

An official at the Finance Division told TBS that no new stimulus package will be announced. The previously announced packages will get new funds and see time extensions to help businesses recover from Covid-19 impacts.

The official said last week, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) applied for funds for the next four months' salaries and allowances for export sector workers. The new allocation for this will be given under the existing package and a new deadline will be set for payment.

Following the prime minister's directive to formulate a new stimulus plan, businesses are seeking various supports, presenting their needs at various levels of the government.

Sheikh Fazle Fahim, president of the Federation of Bangladesh Chambers of Commerce and Industry, told TBS that they had discussions with the government on providing long-term protection in business, investment and employment since the beginning of the Covid-19 hit. In this context, new stimulus packages are coming.

The moratorium facility will be extended further. Traders may need this facility throughout the next year. But everything depends on where the Covid-19 situation goes.

BGMEA President Rubana Huq told TBS, "We would need a fresh wage support package for four months starting from January 2021 at 2% service charge with 60 months' payback period with a moratorium of 12 months."

At the same time, the extension of the current package tenure to 5 years and an extension of moratorium up to 12 months would be of immense help to the sector, she added.

"This temporary help will help the sector go to the next level as we do foresee us excelling by June.  As compared to us, our other competitors: Ethiopia with its political instability, Cambodia with its loss of GSP and Vietnam with its limited production capacity will not be in a better position," Rubana pointed out.

Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association, said, "It is not enough to increase the size and tenure of the existing package. We want the government to set the terms of the stimulus package in a way, which will give us real incentives."

Top News

stimulus / Stimulus Aid Package

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