THE government on Sunday announced four new stimulus packages of Tk 67,750 crore to overcome the possible economic shock from the public holiday declared, starting from March 26, and now extended till April 14, to prevent the spread of COVID-19. The proposal came considering immediate, short and long term economic consequences and proposed four programmes that include increasing public expenditure, formulating a stimulus package, widening social safety net coverage and increasing monetary supply. As part of these programmes, it will provide working capital of Tk 30,000 crore for the Covid-19 affected big industries and service sector institutions, another Tk 20,000 will be provided to the small and medium industries with nine per cent interest. The commercial banks will provide the loans from their own resources on the basis of bank-client relationship and the government will pay part of the interest from public exchequer to the respective banks as subsidy. The package also proposes to expand Bangladesh Bank’s export development fund and a new loan facility system titled ‘pre-shipment credit refinance scheme.’ These are significant policy decisions to stimulate the economy in time of a health emergency, but it exposes the government’s pre-existing class bias as the package only fleetingly mentions the people on the threshold of poverty with no clear directives on how their economic survival will be ensured.
Economists have raised concern that the package involves subsidising interest rates on loan; a lowering of cost of borrowing in an already struggling banking sector may backfire unless a mechanism is put in place to make certain a judicious loan approval process and tackle corruption. A potential problem of fiscal stimulus, as experts have alerted, is that to increase public spending, the government may have to increase its borrowing, which would lead to a higher debt-to-GDP ratio. Since the loan, in accordance with the government’s working plan, will be disbursed on the basis of bank-client relationship, it will exclude a large majority of the small businesses and entrepreneurs who are already bearing the worst of the on-going crisis. While it is important to provide support to the industrial, business and service sector, the package has very little for the agricultural economy that has significant contribution to our national GDP. Farmers across the country are already bearing losses as prices of produces are dropping on the market. Needs of people who are dependent on their daily wages are not directly addressed in the package. The government has mentioned that it would expand the scope of social safety net programmes, but it is not made certain how and when. Therefore, left leaning political leaders are not wrong when they term the package as exclusionary and that it has failed the poor.
The exclusionary stimulus package was announced at a time when the economic struggle of daily labourers and farmers during the public holiday is already a matter of public concern as they are coming out defying the required social distancing. Unless and until the government include the workers in informal sectors and farmers into its stimulus package with food aid, risk allowance and rent support where needed, the purpose of the public holiday will be defeated.
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