Four key areas that need urgent attention | The Daily Star
12:00 AM, May 07, 2020 / LAST MODIFIED: 01:28 AM, May 07, 2020

Four key areas that need urgent attention

The economic crisis caused by Covid-19 is deepening in Bangladesh every day. This level of crisis is unprecedented at both the national and global levels. It is now inevitable that the global economy will fall into a deep recession. If the economic crisis in Bangladesh is prolonged, there is also a big risk of social crisis. The health crisis in Bangladesh is also growing. We are already observing worrisome health-related impacts in the country, with the number of coronavirus-infected people increasing at an alarming rate along with the number of deaths.

Although there is much debate about the country's economic growth rate during this crisis, there is no doubt that all the drivers of economy have been severely affected. These include the export sector, especially the garment industry, remittances, domestic industries and services, agriculture, poultry, fisheries, and the small and medium enterprises. The crisis is also having a heavy toll on the poor and vulnerable people. SANEM's ongoing research shows that the crisis could lead to a big jump in the poverty rate in Bangladesh, and that the success of poverty reduction in the country over the past decades could be lost. However, the depth of its impact on the economy will depend on the duration and spread of the crisis. Nevertheless, considering the dynamics of the crisis so far, it is obvious that it is going to leave a big mark on the economic growth and social achievements of Bangladesh.

To cushion the blow of the economic crisis, the government has announced a stimulus package that involves a big amount, which may increase further in the coming days. However, the success of this stimulus package depends on three things: financing, management and monitoring. There are four possible sources of financing for this huge amount. First of all, it is necessary to immediately suspend or cancel the "unnecessary" or less important projects of the government. Second, borrowing from international organisations such as the World Bank, IMF and ADB. Third, borrowing from the banking sector (however, in the face of the prevailing crisis in the sector, it is necessary to borrow with sufficient caution). If these three options are exhausted, then the fourth option is to print money, which, in my view, should be kept as a last resort.

Proper management of the stimulus package is vital. There are two aspects to the package: one is to provide assistance to the affected industries, and the other is to address the food safety problem of the poor and vulnerable people. In both cases, there is a need for efficient supervision—who will get the money and how. The government needs to ensure transparency and accountability in the whole process. Without proper monitoring of the use and management of the stimulus package funds, its purpose will be severely hampered. This requires the immediate formation of a national monitoring committee comprising representatives from government agencies, NGOs, civil society, the business community, and labour organisations.

Given the severity of the crisis, a two-year economic recovery plan is needed, the main objective of which should be to bring the economy of Bangladesh back to its pre-crisis state. At this juncture, there is a need for proper implementation of the stimulus package as well as some "politically feasible", much-needed policy reforms in trade policy, tax structure and banking sector. In this case, the next national budget (2020-2021) should be very different from the past budgets. This budget needs to have specific action plans for the health sector, the affected economic sectors and social security programmes on a priority basis. In all these areas, a quick assessment is needed now to accommodate a large amount of additional funds under the stimulus package. We don't need to worry much about the budget deficit at this time. In contrast to the 4-5 percent budget deficit in normal times, the government may consider a budget deficit of up to 8-10 percent during this crisis.

Above all, there is an urgent need to pay special attention to four areas: health, food security, agriculture and normalisation of the economy. Let me explain each in the following paragraphs.

First, the crisis caused by Covid-19 has shown us that there is no alternative to public spending and government initiatives in the health sector. Surprisingly, in the last two decades, public expenditure on health as a proportion of GDP in Bangladesh has remained at 0.5 percent, which has declined over time. This should be at least 4 percent. The ongoing crisis shows the dilapidated state of government hospitals and public health services. At the same time, it shows a lack of accountability in private hospitals and private health services. This needs to be fixed. It is also important to keep in mind that with the significant increase in public expenditure in the health sector, transparency and accountability in spending must be ensured.

Second, in order to ensure food security for the poor and vulnerable people, it is necessary to distribute essential food items at the local level on the basis of the list of the poor that the government has under the social security programme. There is a need to come up with new lists to include the excluded poor and vulnerable people. At the local level, administrations, public representatives, volunteers and NGOs can work together to create and update the lists, distribute food, and prevent irregularities throughout the process. Capable individuals in the private sector and private-sector organisations (such as BGMEA, FBCCI, MCCI, DCCI) need to come forward to ensure food security for their workers and staff.

Third, several steps need to be taken to implement the government's stimulus package for farmers. Since the domestic supply chain of the agricultural market has collapsed, the current crisis in the sector cannot be solved by just giving loans to farmers. This requires measures to ensure the supply of agricultural inputs at the field level is maintained in compliance with health safety norms, even in this lockdown. In this case, the ministries of agriculture, health, transport and home affairs will have to work jointly with the local administrations and businessmen. An immediate issue is the management of boro harvesting. Agricultural workers, who travel from different districts of the north to work during boro cultivation across the country, are unable to travel during the lockdown. Due to this, there is an extreme crisis of agricultural workers in different parts of the country. A similar crisis is seen in the cultivation of summer fruits. In this case too, the ministries concerned must work closely with local administrations to ensure safe travel for agricultural workers, in compliance with health regulations. My recommendation is to give interest-free loans to farmers under the stimulus package. It is important to keep in mind that ensuring food security for all will be a big challenge in the coming days. The highest priority thus must be given to the agricultural sector, and every effort must be made to ensure that production is not disrupted.

Fourth, initiatives can be taken to keep the necessary economic sectors open to a limited extent while maintaining the highest level of health safety standards for workers. In this case, the relevant government agencies and factory owners need to come up with appropriate sector-specific and region-specific protocols. At the same time, full transparency and accountability must be ensured in how this protocol will be implemented. But the implementation of such an initiative depends on the level of coronavirus-related health risks in the country, which is changing every day.

I think it's not just the government's responsibility to deal with the kind of crisis we're going through and the huge economic blow we're going to face in the days ahead. In this case, the government, NGOs, civil society, various industrial and business organisations and workers' organisations all need to work together.


Dr Selim Raihan is Professor, Department of Economics, University of Dhaka, and Executive Director at South Asian Network on Economic Modeling (SANEM). Email:

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