Taming coronavirus rampage: Unprecedented bailout package on the way

Shapla Square in Motijheel
Shapla Square in Motijheel, the prime commercial area of capital Dhaka, devoid of its customary hubbub and vehicular congestion around noon on Sunday, a sure sign of social distancing having taken effect in efforts to stem the spread of COVID-19. Photo: Palash Khan

The government is set to roll out a massive rescue package for the low-income group, businesses and industries, all of whom are bearing the brunt of the near-collapse economic activities brought on by the coronavirus pandemic.

The prime minister would outline what steps the government would be taking during her address to the nation tomorrow, Finance Minister AHM Mustafa Kamal told The Daily Star yesterday.

The deputy commissioners would oversee the task of selling rice at discounted prices through the open market sale (OMS) while the Army would cooperate. 

The affected businesses would be compensated; but the modalities are yet to be worked out, Kamal said.

Loans would carry no interest during this difficult time. Besides, the repayment period for the loans would be extended.

The government would pay the salaries and wages if factories are shut down because of the coronavirus.

"The finance ministry has already started working on these issues," Kamal said.

The development comes after the top-brass of the finance ministry met with Prime Minister Sheikh Hasina on Saturday.

As part of the efforts to alleviate the economic pains confronting the lower income groups, including day-labourers, rickshaw-pullers and street vendors, the government plans to sell rice at Tk 5 per kg through the OMS across the country, down from Tk 30 a kg at present.

The government has a stock of 17.51 lakh tonnes of rice and wheat in its storage facilities as of March 3, according to the food ministry website. Of the quantity, rice accounts for 14.29 lakh tonnes and wheat 3.22 lakh tonnes.

The food storage situation is at a satisfactory level and there is enough stock of food grains compared to monthly supply and distribution plans. There is no possibility of a food shortage now, said the ministry.

The government also plans to sell some other essential items at discounted prices, said a finance ministry official.

The allowance under the social safety net programmes would be enhanced. The increase has not been determined yet. Jobs would be generated for the people so that they can survive at the critical hour.

Many people are already out of jobs in major cities, particularly Dhaka, as educational institutions have already been shut down to slow the spread of the virus. Banks and non-bank financial institutions have put in place alternate duty roster for their staff.

All government and private offices will be closed from March 26 to April 4 to prevent the spread of coronavirus, Cabinet Secretary Khandker Anwarul Islam told reporters yesterday.

Government offices except those involved in emergency services such as law enforcement and hospitals have been declared shut.

The move comes as the coronavirus, which originated in China three months ago and has since ravaged many economies, is spreading in the country fast.

Yesterday, the government confirmed third death linked to the virus.

The official death toll from coronavirus in the country is now three and the number of total infected stands at 33, according to the Institute of Epidemiology, Disease Control and Research (IEDCR).

The coronavirus pandemic could trigger a global economic crisis, destroying up to 25 million jobs around the world if governments do not act fast to shield workers from the impact, said the International Labour Organization (ILO) in a report recently.

Regardless of size, all firms are facing serious complications from the coronavirus fallout such as immense decline in revenue, insolvencies and job cuts, said Tuomo Poutiainen, country director of the ILO Bangladesh.

"Sustaining their day-to-day operations will be particularly difficult for small and medium enterprises," he said, in a statement to The Daily Star, on Thursday.

The economic pain for the low-income groups and those working in the informal sector would exacerbate further if the situation worsens.

Business and employment would confront adverse impact if economic activities need to shut down in case of the coronavirus outbreak, said the Centre for Policy Dialogue (CPD) in a briefing on Saturday.

Workers usually work under temporary contractual arrangement particularly those work in small-scale and informal enterprises would be affected most. Those who work in labour-intensive formal and export-oriented industries would be adversely affected, the think-tank said. 

The government is seeking funds from development partners to help the health ministry combat the spread of the novel coronavirus as well as to keep its operation smooth.

Bangladesh is looking to avail $750 million in budgetary support from the International Monetary Fund (IMF), which has made available about $50 billion through its rapid-disbursing emergency financing facilities for low-income and emerging market countries that could potentially seek support.

The amount would account for 50 per cent of the quota Bangladesh is entitled to.

Of the IMF fund, $10 billion is available at zero interest for the poorest members through the Rapid Credit Facility, according to the IMF website.

The World Bank has also received a request from the finance ministry for $100 million financing, said Mercy Tembon, the WB's country director for Bangladesh and Bhutan, last week, adding that it would work with the government to process the request.

The government would seek another $100 million from the WB in budget support, the finance ministry official said.

The Asian Development Bank (ADB) has announced a $6.5 billion initial package to help developing countries in Asia with their immediate responses to the spread of coronavirus.

The Manila-based lender may provide $500 million to Bangladesh initially as budget support in order to help the country improve its health system and assist the vulnerable groups.

The amount may go up, said a number of finance ministry officials earlier.

The ADB has recently announced $6.5 billion initial package to address the immediate needs of its developing member countries as they respond to the COVID-19 pandemic.

The lender's response to date also includes $2 million announced on 26 February to support response in all of its developing members.

Bangladesh may receive another $3.5 million in grant from the ADB and $50 million in grant from Jeddah-based Islamic Development Bank. 

The government is looking to secure support from the development partners as its finances may come under strain due to falling revenue collection by the National Board of Revenue (NBR) and rising public borrowing from the banking sector.

The NBR could log in Tk 124,500 crore in the first seven months of the fiscal year, missing the periodic target by Tk 39,500 crore, provisional data showed.

In the first half of fiscal 2019-20, the government borrowed Tk 49,000 crore, which is 63 per cent of the year's target. Of the sum, Tk 43,600 crore came from banks, which is eight times more than a year earlier.

"The top policy priority at this stage is safety of public health. There can be no compromise on that front," said Zahid Hussain, a former lead economist of the World Bank Dhaka office yesterday.

On the economic front, what is most urgent is protecting the vulnerable in the informal and formal sectors, he said.

"They are mostly urban and rural low-income households who depend on wage and self-employment for their livelihoods. They need social assistance to survive the economic disruptions caused by social distancing."

Unconditional cash transfers using mobile financial services and in partnership with para-state and non-government institutions can save these households from slipping into poverty, the economist said.

"We all need to keep one reality in mind: if the pandemic is protracted, what will save livelihoods at the end of the day is not the printing machines or credit entries. What will save livelihoods is our willingness to share the accumulated real wealth with those who do not have the capacity to cope with the cracks in livelihood systems resulting from cautionary steps taken to save lives."

Businesses are also at risk, particularly the micro, cottage and small enterprises.

"They need assistance in paying bills to stay afloat."

Temporary payroll support, tax concessions and even financial bailouts are options that deserve serious consideration keeping the resource constraints in mind, Hussain added.