New stimulus package to absorb economic shocks

The Prime Minister's announcement of four new stimulus packages of TK 67,750 crore, along with the previous TK 5,000 crore package, is a bold and reassuring step for the entire country, which is in a state of extreme uncertainty. This stimulus package is intended to overcome the inevitable economic shock from the ongoing shutdown, which is crucial to prevent the spread of the coronavirus. The four packages aim to increase public expenditure, widen social safety net coverage and increase monetary supply.

The business community, in particular, has welcomed the various packages as they will alleviate much of their worries. While this is a welcome package that targets primarily the economy, the biggest challenge is efficient and proper implementation of these policies. This includes making sure that vested groups do not try to take undue privileges and the allocations are distributed to the right groups.

The government has devised a formula through which commercial banks will provide loans at low interest rates. The interest rate of this loan facility will be 9 percent, of which the loan takers will provide 4.5 percent while the government will provide the rest of the interest to the respective banks as subsidy. Here we urge the government, as some economists have, to make sure loan defaulters do not take advantage of this facility. The government and central bank must devise ways to assist the small and medium enterprises (SMEs) that have to pay rent for their shops and offices as well as pay their employees.

As we know, this crisis will hit the lower income and marginalised people the most. Therefore, the stimulus package must also target farmers, migrant workers and all those people who work in the informal sector. Without being assured of a financial assistance and social safety net programme, it will be hard to sustain a shutdown as people will be forced to come out to earn their living. So far, we have not heard of a specific amount to be allocated to these groups. Direct cash transfers through mobile financing can be part of this effort.

In order to get the maximum benefit of the stimulus packages, the government should collaborate with the huge network of NGOs and other development organisations, economists and social welfare experts to make sure that the most vulnerable groups and businesses are helped. The implementation of these policies must be done in a transparent, timely and efficient manner.