Anatomy of the Stimulus Package in Bangladesh
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Anatomy of the Stimulus Package in Bangladesh Selim Raihan1,2
© Indian Society of Labour Economics 2020
The economic crisis, caused by COVID-19, is deepening in Bangladesh over time. The crisis is unprecedented at both the national and global levels. It is now inevitable that the global economy will fall into a deep recession. If the economic crisis in Bangladesh is prolonged, there is also a high risk of social crisis. The health crisis in Bangladesh is high as the country is already observing worrisome health-related impacts of COVID-19. The number of coronavirus infected people is increasing at an alarming rate, and, at the same time, the number of deaths is also on the rise. Forecasts by different international organisations suggest that the crisis is likely to drastically reduce the Gross Domestic Product (GDP) growth rate of Bangladesh. Since the onset of the crisis in March 2020, all major economic activities in the country have been severely affected. With the global economy going into a deep recession, exports from Bangladesh have fallen in an unprecedented manner. The remittances, despite some temporary surges, are also feared to be badly hit in the coming days. On the social front, poverty and employment situation in the country has become grave. The crisis is likely to lead to a big jump in the poverty rate in Bangladesh. The success of reduction in poverty so far is feared to be undermined due to this crisis. The crisis is going to have a long-lasting dent on the development trajectory of the country. To combat the economic and social crisis and to ensure recovery of the economy, the government announced 19 stimulus packages accounting for around 3.7% of the GDP of the country. The stimulus measures, taken so far, are as follows: (1) BDT 50 billion for export-oriented industries to pay the wage bill for three months. This stimulus package comes as 2-year loans to factory owners at 2% interest. (2) BDT 300 billion for banks to provide working capital loan facilities to the affected industries. Loans, under this stimulus package, are at an interest rate of 9%. While half of the 9% is to be borne by the borrower, the other half will be borne by the government as a subsidy. (3) BDT 200 billion for banks to provide working capital loan facilities to small (cottage industries) and medium * Selim Raihan [email protected] 1
Department of Economics, University of Dhaka, Dhaka, Bangladesh
2
South Asian Network On Economic Modelling (SANEM), Dhaka, Bangladesh
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Vol.:(0123456789) ISLE
The Indian Journal of Labour Economics
enterprises. However, these loans are at an interest rate of 9%, 4% to be borne by the borrower, and 5% by the government as a subsidy. (4) A refinance scheme of BDT 50 billion for the agriculture sector. The Bangladesh Bank will charge interest of 1% from banks, and banks will charge 4% from customers. The loan will be repayable within 18 months including the six month grace period. (5) Under the Back-to-Back LC arrangement, the Export Development Fund of the Bangladesh Ban
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