Two timely new government stimulus packages

The government's decision to roll out two new stimulus packages for a total of Tk 2,700 crore is a welcome one. One of the stimulus packages is meant to boost the cottage industry and SMEs, and the other is being introduced to expand the social security scheme for the elderly and widows in poverty-stricken areas. The pandemic has hit all businesses hard, but while the big industries are recovering quite well, small businesses are still struggling. In light of that, it is an excellent idea for the government to expand support to them. As far as increasing the government's social security scheme is concerned, that is always a good idea but particularly more so now, as the poor are experiencing great misery due to the pandemic and are in desperate need of support.

The government's first stimulus package for the cottage industry and SMEs was less successful in comparison with its stimulus package for big industries due to a number of reasons. What is encouraging is that it seems that the government has listened to those criticisms and has taken note of what it did wrong. Thus, in designing its latest stimulus package for small and medium businesses, the government had taken recommendations from various stakeholders such as business leaders, government officials and representatives from banks, development partners and other agencies.

Having involved other stakeholders, the government has decided to give loans to micro and cottage entrepreneurs through various government and semi-government agencies like the SME Foundation, the BSCIC and Bangladesh NGO Foundation. This, theoretically, should make things easier for small businesses than acquiring the loans from banks, which had to be done in the case of the previous 20,000 crore stimulus package.

However, there are still some things that have to be sorted out, like deciding on a suitable interest rate for the loans. And experts have suggested that the government should look to give small businesses a one-time grant rather than loans, as they are already finding it hard to balance their books and may not be able to afford further expenses. Experts also fear that the aid package has been spread too thinly among the different organisations that are meant to disburse them. In order to solve this problem, the government can distribute the funds left over from the previous stimulus package for these agencies to also disburse on top of the amount from the new package.

Most importantly, the efficacy of both aid packages will ultimately come down to how well the government addresses corruption. Nearly all of the government's previous aid programmes to the poor were marred by corruption and it must ensure that the same doesn't happen to this one. Therefore, proper listing of eligible beneficiaries and pilferage-free transfer of the cash payments to those who deserve it should be the government's top priority.