Taming coronavirus rampage: An efficient and inclusive approach may be the need of the hour
The outbreak of coronavirus is deepening in the united states and the risks on public health insurance and overall economy is getting high.
Although the contagion of the virus has been snowballing in the united states for during the last two months, its impact has been realised only now, as the COVID-19 patients are being confirmed, cross-border trade getting squeezed, domestic monetary activities coming to a near standstill, people's movement getting restricted and marginalised people being affected.
The Centre for Policy Dialogue (CPD) has analysed the possible consequences of the coronavirus pandemic on the economy and put forward a set of proposals to handle the challenges.
In this backdrop, the federal government has announced a number of support measures targeting the main element economical activities and working persons involved with various formal and informal activities that will tend to be affected.
Taking into consideration the economywide impact of coronavirus, the announced support measures although timely are believed to be 'modest' and at best an 'initial' response of the federal government.
It is expected a broad-based support measures will be announced taking into account the short-, medium- and long-term demands through the upcoming cover fiscal 2020-21, with the cooperation of the development partners, multilateral agencies and other private sector-led initiatives.
We appreciate the announced measures but simultaneously we would like to increase few proposals so as to ensure their effective and efficient utilisation by the mark groups as well concerning raise the demands of those who would still be 'left behind'.
The government measures can be categorised into three groups: a) targeted support measures for all domestic level businesses; b) targeted support measures for export-oriented industries; c) targeted measures for working persons particularly those employed in the informal sector.
A significant focus of the measures is to support the workers involved in various formal and informal monetary activities and have minimal risk-coping capacities against such side effects.
Following discussions highlight the level of efficiency and inclusiveness of the measures:
a) Targeted support measures for all domestic level businesses: All categories of enterprises operating domestically should get active support of the measures announced by different public agencies.
Bangladesh Bank has announced a couple of support measures that include: extension of timeline for repayment of instalments of credit for half a year and for bill of entry of import letters of credit from 6 months to one year; reduction of repo rate to 5.75 %, CRR to 5 %, which would improve the flow of money by Tk 6,500 crore etc.
Such measures would help local businesses to improve the flow of fund at the enterprise level during temporary shut-down of economic activities in the country.
The ministry of power, energy and mineral resources have announced deferred payment facility of monthly charges of utilities such as for example gas and electricity without deferred fees, which includes provided non permanent relief to businesses and households up to May-June.
Similarly, the option of deferred payment for water bills would extend some relief to its users.
Regardless of the initiatives, a portion of domestic enterprises would be out those support measures and/or have limited importance in their activities.
A large portion of small and medium enterprises (SMEs) and similar enterprises -- such as handloom and cottage industries, agro-based enterprises, poultry/livestock farming, local level clinics, hospitals, restaurants, transport operators including those of bus, truck, covered truck, CNG and taxies, brick fields, rice mills, banks, insurances, NGOs and wholesale and retail shops etc -- may avail marginal degree of reap the benefits of those announced measures.
In this backdrop, another financial package for the above-mentioned domestic market-oriented agriculture, manufacturing and service-oriented enterprises, is highly important.
The federal government may consider establishing a 'revolving fund' with low-interest credit facility from where these enterprises could borrow to pay their staff and other necessary commercial expenses.
b) Targeted support measures for export-oriented industries:The export-oriented enterprises will be benefitted in three ways.
Firstly, all the above-mentioned measures targeted to domestic enterprises will also be applicable for them, such as deferred payment of loan instalment, deferred payment of costs of public utilities without late charge, extension of time for payment of bill of entry of import related L/Cs, reduction of repo rate and CRR to improve money flow throughout the market.
Secondly, these enterprises are certain to get the facility to realise the export receipts at an extended timeline from four to six months, which can only help to increase cashflow at these enterprises.
And lastly, the federal government has announced a Tk 5,000 crore package to meet the expenses linked to wages and salaries of staff and staffs for export-oriented industries. This third measure needs to be discussed.
First, the package is to pay workers' wages of factories in export-oriented industries.
Of course, a significant share of the resource will be distributed to the major export-oriented garment enterprises. However, the other export-oriented industries that are also affected will get the support from here.
These industries include textile, accessories, leather and leather goods, jute and jute goods, plastics, ceramics, pharmaceuticals, agro-processing and electrical and electronics.
The ministry of labour and employment (MoLE) may request the respective associations to talk about the lists of influenced factories.
The associations will submit names of damaged factories after their internal consultation with members. The list will include those most affected and need support to cover their workers' wages.
The assumption is that small, medium and sub-contracting enterprises of all export sectors would want the support most.
The level of support could ensure coverage of wage costs at a maximum level. For instance, for small scale enterprises the coverage could be about 75 %, for medium scale enterprises 50 % and for large scale enterprises 25 per cent.
Enterprises that are in procedure in February 2020 is highly recommended for this support measure. The ones that had shuttered in February 2020 and earlier because of other reasons shouldn't be taken into consideration because of this support measure.
So, enterprises need to submit proof against this, such as Utilisation Declaration permission, bills of electricity/gas/water etc. The support will be provided monthly.
Second, the package has to be utilised most effectively and successfully for the maximum period. It really is apprehended that the adversity on the economy would continue for an extended period, so a preparation for at least six months is required.
In this backdrop, this fund needs to be utilised for at least half a year.
It really is expected that the fund should not be a one-time 'grant' to enterprises/sectors rather it should be a 'revolving loan fund' from where entrepreneurs are certain to get low-interest credit facility (e.g. not more than 3 per cent yearly) to be repaid back nine months, with the first instalment due in 90 days.
Third, the coverage of workers' wages beneath the affected factories must be done transparently.
In this connection, enterprises would submit the full set of payment of workers' wages to the respective associations.
The associations will verify the list and can send to the Department of Inspection for Factories and Establishments for further review.
Afterwards, the entrepreneurs will apply for support with necessary supporting documents to their respective banks. The wages ought to be directly paid to workers' respective bank accounts by using the mobile financial services platform.
c) Targeted support measures for working persons of the informal sector: A number of support measures have been announced for the marginalised people, which include operation of Vulnerable Group Development and Vulnerable Group Feeding programmes, operation of open market sales services, selling rice at a subsidised price of Tk 10 and food support for half a year under the social safety net programmes at the district levels.
However, few other measures such as for example 'ghore fera (return to home)' programme and 'Bhashanchar housing facility' programme appears of little use for the marginalised in the current context.
Besides, the government has requested social organisations and well-off people to come forward to take part in the support programme for the marginalised.
Despite all these initiatives, the outreach to the mark people would be significantly less than the requirement.
It is apprehended a portion of the marginalised people would be out of the benefits, who may fall below the poverty line.
These working people are participating in several types of informal services/activities such as for example people working in hotels, restaurants, shops, drivers of buses, trucks, lorries and autorickshaw, rickshaw-pullers, hawkers and other petty activities.
Besides, a section of limited earners will be affected such as for example autorickshaw drivers, bus/truck/truck-lorry drivers, shop keepers etc.
Even the targeted initiatives have not yet become visible to a big extent.
For instance, the OMS operation is still not visible and persons have no idea from where they could easily get these subsidised foodstuffs.
Insufficient data about these vulnerable group/marginalised persons hinders undertaking targeted measures properly.
We hope that government should extend the facilities such as OMS, cash transfer, VGD and VGF programmes to different target groups both at urban and rural levels.
The revised budget for fiscal 2019-20 may consider further allocation under social back-up programmes to extend the above-mentioned programmes in the united states.
It really is well-understood that Bangladesh must get prepared not merely to handle the immediate necessities of the marginalised group and businesses, but to get prepared for the short- (until June), medium- (until December) and long-term (beyond December) adversities that are invariably along the way.
In this backdrop, the announced programme of the federal government is just the start in addressing the immediate plus some short-term necessities.
However, an expansionary fiscal, budgetary and monetary policy support is expected.
The revised budget for this fiscal year, the upcoming cover fiscal 2020-21 and the upcoming monetary policy statement for another fiscal year are expected to handle those issues.
