Bangladesh's stimulus packages aimed at mitigating the impact of the coronavirus pandemic are one of the highest among a selective group of countries in Asia, according to a government paper.
The government has announced 19 stimulus packages amounting to Tk 103,117 crore since it reported the country's maiden cases of coronavirus infections on March 8.
The combined support accounted for 3.7 per cent of the country's gross domestic product (GDP), according to the mid-term macroeconomic policy statement of the finance ministry.
Among the select group of countries, Bangladesh only lags behind Indonesia in terms of stimulus packages compared to GDP.
The Southeast Asian country has announced stimulus packages worth 4 per cent of GDP.
Vietnam has declared stimulus packages amounting to 3.4 per cent of GDP, Pakistan 3.1 per cent, Malaysia 2.8 per cent, the Maldives 2.8 per cent, China 2.5 per cent, Afghanistan 2 per cent, India 1.1 per cent and Sri Lanka 0.2 per cent.
Bangladesh's stimulus packages have been provided in the form of low-cost loans to affected micro, small, medium and large industries and services, food security, social protection, special allowances and incentives as the pandemic-induced shutdown paralysed the economy, destroyed millions of jobs and created new poor.
"The fiscal and financial package is the largest in the South Asia region," said Finance Minister AHM Mustafa Kamal in his budget speech on Thursday.
Amidst this unprecedented global crisis, the prime minister has announced several stimulus packages to stand by the poor and helpless people, keep the momentum in economic activities and bring back the trend in growth and development, he said.
"These are akin to the bold steps she took to save the country during the Asian Financial Crisis in 1997 and the Global Recession in 2009."
Of the stimulus packages, Tk 5,000 crore went to the export industry, Tk 20,000crore to the micro, small and medium enterprises, Tk 30,000 crore to large industries and services, and Tk 5,000 crore to the agriculture sector.
Given the huge demand from enterprises, such allocation is not likely to be adequate.
Enterprises with shortages of working capital, which, in turn, could force them to go for downward adjustment and operate with fewer people, said the Centre for Policy Dialogue on Friday.
Timely disbursement of credit among the affected farmers, vegetable producers, small dairy and livestock farmers, fruit-growers and shrimp farmers are urgently needed, the think-tank said.
Altogether, Bangladesh needs to put in place a support measure amounting to 6 per cent of GDP, said SR Osmani, professor of development economics at Ulster University, during a virtual discussion recently.
The real challenges lie in implementing the stimulus packages, according to experts.
Of the stimulus packages, only Tk 3,000 crore would come from the government's coffer, while the rest would come from the central bank or the lenders themselves, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
It is the banks that would take the risk, lend money and implement the packages, he said.
According to the economist, it would not be easy for the targeted beneficiaries to receive the funds because of various challenges. It would be tough to lend money to the SMEs at 9 per cent interest rate, a cap the bank has implemented since April.
"How can banks implement the package for the SMEs if they mobilise funds at 6 per cent interest rate?" said Mansur, also the chairman of Brac Bank.
The default rate is high in the SME segment and the rate would be even higher in the current circumstances, he said.
The central bank has stepped in to provide insurance for funds going to the SMEs but banks have to pay 2 per cent for the insurance, he said. The means, banks would get only 1 per cent if they lend to the SMEs.
"Banks would not be interested unless a change is made."
Another Tk 3,000 crore has been set aside for micro and small industries and service and this would be distributed through microfinance institutes (MFIs).
Under the package, commercial banks would lend to MFIs at 5 per cent. MFIs normally charge 20 to 25 per cent, so if they have to lend this fund at 9 per cent, they are unlikely to come forward, said the former economist of the International Monetary Fund.
"We have to revisit these issues," he said. The rates have to be reasonably market-based; otherwise, the packages would not be implemented.
The stimulus package for the large industries can be implemented at 9 per cent interest rate, but the concern is that the loan defaulters are very powerful and some of them are also directors of banks and they may eat up the package, while real businesses would get nothing, according to Mansur.
Banks would only lend when they are convinced that the loans would be repaid.
He suggested the government constitute a working committee immediately to oversee the implementation of the packages.
The committee should consist of representatives from banks, the central bank and the finance ministry and would identify problems in the implementation process.
The committee would collect data from banks on loans and beneficiaries every day, analyse them and publish a weekly report so that the government and the public can come to know what is happening, he said.
"Close monitoring of the committee is a must and the funds have to be disbursed transparently."