40pc of economy to be exposed to coronavirus risks: CPD

Staff Correspondent | Published at 10:00pm on March 21, 2020

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Centre for Policy Dialogue executive director Fahmida Khatun speaks at a web based press briefing on health and economic risks of corona pandemic and recommendations at its office in Dhaka on Saturday. CPD distinguished fellow Mustafizur Rahman, research director Khondaker Golam Moazzem and senior research fellow Towfiqul Islam Khan were also present. — New Age photo

The government may introduce food rationing for lower-income earners, particularly those who are dependent on daily wages, and special incentive packages for the private sector, particularly small and medium enterprises, affected by the global coronavirus pandemic, said the Centre for Policy Dialogue on Saturday.

It said that 40 per cent of the total $310 billion economy will be exposed to the risks of the pandemic.

The independent think-tank also suggested that the government should adopt targeted expansionary measures, among others, to tackle the adverse impacts of the coronavirus in the areas of healthcare, trade, supply chain management, public expenditure and monetary policy.

The government may also revisit the existing incentive packages and policy support and benefits should be given on the basis of damage incurred, not on a wholesale basis, CPD said at a web‑based press briefing on health and economic risks of corona pandemic and recommendations at its office in Dhaka.

It also suggested reduction in the lending rate to 5 per cent for SMEs hit by the pandemic.

The overall economic growth of the country will be affected as the pandemic will have a knock‑on effect throughout the external and internal sectors of the economy following a possible recession in the global economy, it said.

‘The government may introduce food rationing on a limited scale only for lower-income groups if the crisis prolongs as the country has sufficient stock of food grains,’ CPD distinguished fellow Mustafizur Rahman said.

The government should also provide some policy and fiscal support to manufacturers so that they can keep production running and their existing employees working, he said.

At least $120 billion worth or 40 per cent of the $310-billion Bangladesh economy will be exposed to the negative impacts of the pandemic, he said, adding that the sectors to be directly involved were  export, import, remittance and foreign direct investment.

So, the gross domestic product growth projected at 8.2 per cent may not be achieved, he said.

The government, however, should not focus on GDP growth right now, rather it should focus on managing the situation to save lives of the people and the economy, he said.

CPD also said that the Bangladesh Bank could increase liquidity through reducing interest rates and purchasing bonds and bills, like the central banks in other countries, to stimulate the  economy.

The organisation also recommended lowering of bank policy rates to aid injection of additional money into the economy, extension of LC margins on imports and LCs against export development funds from three months to six months and extension of rescheduling facilities for outstanding loans on a case-by-case basis.

CPD executive director Fahmida Khatun said that export and import, which was already in the negative, might be affected further due to the slowdown of the global economy.

Remittance, which is so far the only positive indicator of the country’s economy, may also be affected in the coming months as many expatriates had already returned home while those others who were staying abroad may not get work due to the slowdown in the economic activities of the affected countries, she said.

Public expenditure will face pressure due to additional allocations needed for the health and incentive sectors and reduction in revenue earnings following slower export, import and other economic activities, she pointed out.

Budget deficit may increase to 5.5 per cent, she added.

Revenue collection shortfall may be aggregated further, CPD said, adding that they had estimated a revenue shortfall of Tk 1 lakh crore for this fiscal, even without taking the corona impact into account.

CPD also feared that many people, mostly day labourers and those who worked in the informal sector, might lose their jobs while many small enterprises might also reduce their manpower.

The overall situation may also create risks in food security as prices of essential commodities had already increased as people were stockpiling essential items in fear of a crisis and price hikes.

The research organisation said that the government would require increased budgetary allocations for production and distribution of medicines, improvement of health services and availability of medical instruments and support for health professionals.

The current allocation for the healthcare sector was very insignificant, amounting to only 0.9 per cent of the GDP.

CPD research director Khondaker Golam Moazzem said that international buyers and brands should take the responsibility to pay a portion of the wages for apparel workers in this situation and the government might initiate discussions with global partners and stakeholders on this issue.

He said that the government might also consider placing a temporary suspension on the stock markets under the current situation following the sharp decline in transactions due to fear and other factors.

CPD senior research fellow Towfiqul Islam Khan also spoke at the briefing.