Prime Minister Sheikh Hasina on Sunday announced four new stimulus packages of Tk 67,750 crore to overcome the possible economic shock from the ongoing shutdown enforced due to the deadly COVID-19 outbreak.
With the previously announced Tk 5,000 crore stimulus package, the amount of the whole package now stands at Tk 72,750 crore.
The announcement came from a press conference of the Prime Minister held at her official residence Ganobhaban. It was arranged to brief journalists about the possible impacts of the coronavirus outbreak on the national economy and the ways to face the challenges in the coming days.
In the four new packages, Sheikh Hasina said, her government will provide working capital of Tk 30,000 crore for the COVID-19 affected industries and service sector institutions.
Commercial banks will provide loans from their own resources to the industries or business entities concerned on the basis of bank-client relationship.
The interest rate of this loan facility will be 9 percent, of which the loan taker will provide 4.5 percent while the government the rest of the interest to the respective bank as subsidy.
In the second package, which will be for the small and medium industries, the government will provide Tk 20,000 crore as working capital.
Here too, the commercial banks will provide the loans from their own resources to the industries or business entities concerned on the basis of bank-client relationship.
The interest rate will be the same as 9 percent, but the 4 percent interest will be borne by the loan-taking industry while the rest of the money will be paid by the government to the respective bank as subsidy.
In the third package, the Bangladesh Bank will expand its EDF (Export Development Fund). Aiming to increase the facility for importing raw materials under the back-to-back LC system, the central bank will enhance its EDF facility from $U 3.5 billion to $US 5 billion.
UNB File Photo
As a result, some Tk 12,750 crore, equivalent to $US 1.5 billion, will be added to the respective fund.
The current interest rate of the EDF is LIBOR (London Inter-Bank Offer Rate) + 1.5 percent (which is actually 2.73 percent). It will be decreased to 2 percent, she said.
For the last package, the Prime Minister mentioned that Bangladesh Bank will introduce a new loan facility system titled 'Pre-shipment Credit Refinance Scheme'. The amount of this loan facility will be Tk 5,000 crore in total where the interest rate will be 7 percent.
While addressing the nation on March 25 on the occasion of the Independence and National Day 2020, the Prime Minister announced a stimulus package of Tk 5,000 crore for export-oriented industries to fight the adverse impact of coronavirus on the country's economy. This money will be used for providing the salaries and wages of workers and employees only.
"The total amount of these stimulus packages will be Tk 72,750 crore which will be 2.52 percent of the GDP," she said.
Sheikh Hasina hoped that the country’s economy will bounce back if the stimulus packages are implemented quickly. "And we’ll be able to go to close to the desired economic growth, Inshallah."
She also put emphasis on giving special attention to local products beside the export-oriented sector to overcome the possible global and domestic economic crisis.
In this connection, the Prime Minister urged all to increase production and the use of local products.
She said taking opinions of all concerned, the government has taken various types of steps. "So, there’ll be no problem in the future. All can run their business properly. I don' not see that anyone will undergo sufferings," she said.
Sheikh Hasina mentioned that it is the responsibility of the government to ease people’s sufferings. "That’s why we’ve announced the packages. All will get their facilities," she said.
But, the Prime Minister again warned against corruption and irregularities in implementing these packages. "I just want that all will do their work with honesty. Don’t indulge in any type of corruption, irregularity and misuse," she said.
The Prime Minister also mentioned that if all work properly, no one will be in trouble and the government arranged this considering that.
She rolled out four work plans of the government on immediate, short and long terms basis to offset the possible adverse impact on the country's economy. These include increasing public expenditure, introducing fiscal packages, expanding social safety net programme and increasing money supply.
Sheikh Hasina said in public expenditure, job creation will be given priority and foreign trips and luxury expenses will be discouraged.
She mentioned that as the loan status-GDP ratio of the country is very low at 34 percent, the excess public expenditure will not create any problem to the macroeconomy.
The Prime Minister said through the banking system, some loan facilities will be introduced with lower interest rate. “The main aim of these loans is to revive the economic activities, keep workers and employees in their respective works and keep intact the capability and competitiveness of entrepreneurs.”
To meet the basic rights of people living in under the poverty line, day-labourers and those involved in non-formal activities, the government will expand its social safety net programme, she said.
About increasing the money supply, Sheikh Hasina said it is necessary to overcome the adverse impact on the economy.
She mentioned that Bangladesh Bank in the meanwhile has reduced the CRR and Repo to increase the flow of money which will continue in the coming days as per the demand. "But for this purpose, there would be no inflation due to the money flow," she added.
The Prime Minister said time has not come yet to say anything specifically about the negative impact of coronavirus, which is ravaging the entire world, on the country's economy.
Focusing on some possible economic impacts, she said import expenditure and export income have decreased 5 percent compared to the same period of the last fiscal year. “At the end of the fiscal year, it’s apprehended that it’ll further be widened.”
Sheikh Hasina mentioned that there is possibility that desired private investment might not be achieved due to the implementation of ongoing mega projects, establishment of economic zones and delayed implementation of reducing bank interest rates.
She said there will be adverse impact on service sectors, especially hotel-restaurant, transport and aviation.
The Prime Minister said like other markets around the world, there is an adverse impact on the capital market of the country, too.
Due to the decreased demand of fuel worldwide, its price has been decreased by 50 percent and it will have an impact on remittance earnings, she said.
Sheikh Hasina mentioned that although Asian Development Bank projected the economic loss for Bangladesh to $US Dollar 3.02 billion, the amount might be much higher considering the present context.
She also said due to the long holiday or the lockdown, the production of small and medium industries came to a standstill and due to the restrictive transport services, the purchasing capacity of the low-income groups has been reduced and there might be a problem in the supply chain
The Prime Minister said in the current fiscal year, the revenue collection will be lower than the target which might result in additional budget deficit at the end of the year.
She mentioned that the GDP growth will come down due to the negative impacts of macro indexes.
In this connection, she said in the last three years, the GDP growth was more than 7 percent while the main driving power of 8.15 percent GDP growth in 2018-19 fiscal was strong domestic demand with conducive revenue and monetary policies.
Due to the quick spread of COVID-19, the Prime Minister said, huge pressure has been created on healthcare services while unprecedented lockdown as well as communication shutdown to prevent the transmission of coronavirus started casting a negative impact on the world economy.
She mentioned that industrial production, export trade, service sectors, especially tourism, aviation and hospitality, small and medium entrepreneurship and employment, have collapsed.
Hasina said not only the supply chain and consumption but also investment demand has started coming down.
She said the International Monetary Fund (IMF) announced that the world economy has already started experiencing recession while indexes have fallen 28-34 percent in the world capital markets. As per the OECD (Organisation for Economic Co-operation and Development), if the rescission prolongs, the world growth will be reduced to 1.5 percent, and it will be the great depression after the World War II.
The Prime Minister said it is apprehended that a huge number of people will be left unemployed worldwide.
At the press conference, she said the government started undertaking measures with highest importance to prevent the coronavirus immediately after its outbreak in China.
At the same time, the IEDCR, Prime Minister's Office and Health Ministry have opened separate control rooms and began monitoring the situation round the clock, Hasina said.
She said the deadly coronavirus could not yet spread widely in Bangladesh due to timely and appropriate measures taken by the government. "The situation is under control."
Hasina said the government formulated "National Preparedness and Response Plan for Covid-19, Bangladesh" following the guidelines of the World Health Organization.
Explaining details of the three-tier activities, she said steps have been taken to discourage foreign trips and homecoming from abroad, detect infected persons and prevent the spread of the virus among others as well as to provide proper treatment to the infected persons.
The Prime Minister mentioned that a national committee has also been formed under the leadership of the Health Minister with representatives from various ministries, World Health Organization and medical professionals as its members to provide necessary guidelines.
Besides, she said, a 17-day general holiday was declared from March 26 while almost all mills and factories, tourist spots, markets and transports were declared closed and the people were instructed to stay at home and maintain social distancing to prevent the spread of coronavirus.
Hasina again urged the country’s people to celebrate Pahela Baishakh on April 14 staying at their homes. "The cultural programmes can be aired through media. This can be social media," she said.
Talking about upcoming Shab-e-Barat which will be observed on April 9, she called upon Muslims to perform their prayers at their homes. "Please seek blessings staying at your homes so that Almighty Allah save us all, people of the country could advance socioeconomically, people from home and abroad get rid of his pandemic," she said.
On Thursday evening, the Prime Minister held a high-level meeting at Ganobhaban in this regard. Finance Minister AHM Mustafa Kamal, PM's Principal Secretary Ahmad Kaikaus, Bangladesh Bank Governor Fazle Kabir, Finance Ministry Senior Secretary Abdur Rouf, and PMO Secretary Md Tofazzel Hossain Miah were present.