Current stimulus inadequate for economic recovery: Experts
They recommend that the government offer a new package of loans as well as cash assistance for CSMEs
To save the economy from the fallout of the Covid-19 pandemic, Germany has announced a stimulus package that is as large as 24% of its GDP, while stimulus measures announced by the USA amount to 10% of the country's GDP. India too has provided huge assistance for business and investment to mitigate pandemic shocks.
On the other hand, Bangladesh has announced a stimulus package to the tune of 4% of its GDP.
This sum of allocation is not sufficient to help the economy recover by coping with the impact of Covid-19 in Bangladesh, experts said at a webinar organised by Initiative Leading Development (BUILD) on Thursday.
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They recommended that the government offer a new package of loans as well as cash assistance for cottage, micro, small, and medium enterprises (CSMEs).
At the online seminar, BUILD also published the findings of its study on "Covid Stimulus and Links to Employment, Consumption, and Investment: The Bangladesh Experience, Global Lessons, and Priorities for Next Round Support".
Dr M Masrur Reaz, chairman of Policy Exchange made the keynote presentation and highlighted that the design of the government-announced stimulus packages is not adequately inclusive because of a lack of consideration of the challenges and needs of small entrepreneurs.
He added that the working capital support and the overall design of the packages lacked incentives for employers to sustain employment.
Sharing some examples of stimulus packages in different countries such as Germany, India, China, Vietnam, and the USA, he proposed several short and long-term recommendations for a robust next round of support.
A rapid survey conducted in February this year as a part of the study also found that the sales 86% of SME firms were negatively impacted due to the pandemic while 95% of firms reported a depressed demand currently compared to the pre-Covid scenario, which indicated that consumption and demand had not recovered fully.
About 83% of SMEs received no stimulus relief while 69% of firms were unable to pay staff wages and social security charges along with other fixed costs due to the Covid-19 pandemic, according to the survey findings.
Prof Dr Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue said the stimulus figures announced by the government are too inadequate compared to the demand.
Stressing the need for a new stimulus package to support the economy, he said, "If the government spends 25% of the GDP, it will add 40% to the GDP."
He recommended that the government announce segmented stimulus considering the 60.5 million labour force, of which 4.4% are employees, 44% are self-employed, 11.55% are family helpers and 15.5% labourers.
The involvement of NGOs in the disbursement process of financial support will make the SME environment better, he observed.
Rizwan Rahman, president of Dhaka Chamber of Commerce and Industry (DCCI), said Covid-19 hits the GDP growth, employment generation, SME sector, consumer demand, retail and tourism sectors as well as other economic indicators that are facing a slow momentum.
"The cash flow system needs to be taken into account. Terms and conditions for the informal sector to avail financial support needs to be simplified. Moreover, the initiative to formulate a SME database will identify the true beneficiaries."
Md Jashim Uddin Ahmed, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said it is too difficult for SMEs to get stimulus loans on the conditions of customer-bank relationship. A large number of CSMEs are not taking any stimulus due to the condition, he added.
He asked for relaxing the conditions in the stimulus measures and providing cash assistance instead of loans to CMSMEs.
Planning Minister MA Mannan, who joined the webinar as chief guest, said the country's economy has been growing gradually because of millions of small drops of investment.
Mentioning that the national budget for the 2021-22 fiscal year has focused on the continued economic recovery amid the pandemic, he said the government will consider the demand of the bottom line of the society, if a second stimulus package is formulated where importance will be given to activate more SME supportive organisations.
Tuomo Poutiainen, director of International Labour Organisation said social inclusive measures like assisting youth, real unemployed, vaccination programs, access to education, mental health need to be addressed and linked to the stimulus package.
To ensure continuity of the growth of investment, productive employment and the social safety net programme, the upcoming stimulus package should focus on inclusive areas, he opined.
Dr Md Masudur Rahman, chairperson of the SME Foundation; Mahbubul Alam, president of the Chittagong Chamber of Commerce and Industry (CCCI); Asif Ibrahim, chairman of the Chittagong Stock Exchange, and BUILD CEO Ferdaus Ara Begum, among others, were presented the webinar.
Nihad Kabir, president of the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) moderated the panel discussion.
In his welcome note, Abul Kasem Khan, chairperson of BUILD, said the initiatives and leadership of our Prime Minister Sheikh Hasina to combat Covid-19 gave confidence to the economy. Unemployment, demand generation and savings need to be addressed to make the initiatives more fruitful, he added.
Jamal Uddin, general manager of the Bangladesh Bank informed the online seminar that about 73% of the CMSME stimulus has been disbursed, benefiting about 100,000 entrepreneurs of which about 5.58% are women.
The disbursement rate is 98% in the case of financial support announced for large-scale entrepreneurs. In agriculture, about 80% of stimulus has been disbursed, benefiting about 1.7 lakh people.
