In view of COVID-19 pandemic, BUILD, a private think tank stressed the need for detailed analysis by a pool of researchers to understand and assess need of the country and also to understand short, medium and long term measures in order to uphold the growth momentum which has been achieved as a result of all concerned.
"COVID-19 has brought a wave of new changes and challenges not only with in the country but also throughout the globe will impact maintaining bilateral, trilateral and global relationship. The socio-political impact of the COVID-19 is not clear yet, respective countries have to have in-depth analysis on these issues," BUILD said in a statement.
It said Ministry of Industries/BIDA/ MOC can take a task by circulating an online FORMAT for gathering information on impact of the COVID19 on different industries so that an assessment of loss can be prepared immediately to announce stimulus package for the survival of the concerned sector.
Uncertainties are mounting as households and businesses are facing liquidity crisis. As we move into further uncertainty, falling demand is affecting supply chain both locally and internationally. Government policies need to be devised to keep the economy with various mechanisms at its disposal.Today, our public borrowings have increased in recent years and liquidity crisis has its limitations within our financial systems, therefore with the limited resources, our policy planners need to plan accordingly to have a balance approach. Adequate resource allocation will be needed to reallocate funds to the critical areas of the economy keeping in mind the objectives of saving lives to saving livelihood.
Even with these limited resources, our policy support must ensure the best strategies for best course of action. The country’s export earnings in the July-February period of the current fiscal year fell by 4.79 per cent as the earnings continued declining in February amid the coronavirus outbreak in China, a major country for Bangladesh for primary and intermediate raw material sourcing. Bangladesh’s export earnings in the eight months of FY 2019-20 declined to $26.24 billion from $27.56 billion in the same period of last fiscal year Foreign buyers had already canceled 15 to 30 percent of the export order, as per source of the concerned association. There is a serious need to assess the potential loss of all sectors and take decision accordingly to announce stimulus package. In the meantime, Government announcement of BDT5,000 crore for meeting the salary of export-oriented industries is welcomed by all, however, it may not be enough to meet sectoral demand if the situation continues beyond our expected timelines. Furthermore, we must address the local industry that will need policy support as they are also deeply affected in light of the current economic situation.
There must be interventions targeting industries that are worst hit by the coronavirus pandemic. One key policy directive can be to extend loans at the lowest possible or zero interest rate to industries on the pre-condition to keep workers on payroll regardless of their work. We will need to address the critical issue of the impact on all sectors including the MSME which involves many business types spreading across the country.
In order to address these concerns and also to address the overall socio economic situation, we can create a National Economic Fund (NEF) which can be in the range of 10% -12% of the National Budget amount, approximately Taka 50,000 crore (USD5b) - which will be 1.6% of GDP. Under which,a Special Economic Assistance Fund – (SEAF) could be created under the National Economic Fund (NEF) designed to support liquidity for business from MSME to large firms to cater to the need to overcome the current and on-going disruption due to prevailing situation This fund will extend loans with no interest with extended installment payment with a starting grace period of 3 months.Perhaps this is the appropriate time to issue an emergency bond. Preferably for exporters in foreign currency since they earn in dollars. This will free up some BDT resources for MSMEs in the budget.
Government should take necessary measures to reduce income tax and corporate tax rates by 5% across all sectors. Additional Tax relief for business connected with its past tax payments records for minimum 3 years. In addition to that delayed tax payments process to be introduced so that business/industry and individuals are not under financial difficulties. NBR should also consider postponing collection of taxes for 2 quarters.No charges of any tax delays, zero demurrage charge on import and other relief needs to be given to businesses particularly for SMEs.
Safeguarding employment is an important challenge for the Government. Government must ensure businesses don’t cut jobs due to the economic down turn. Therefore, some mechanism needs to be developed to keep jobs. Therefore, additional 2% tax relief to firms where there is no job loss for next one year.
Government should increase spending on research and development including health services should be encouraged in the budget for the coming year. 2% of gross revenue of a company should be allowed for investment in R&D, Innovation, Health Costs, Training, SDG etc. It is also vital to encourage PPP models for setting up hospitals and clinics in the upcoming budget with special support in allocating land.
As per UNCTAD report the coronavirus (COVID-19) outbreak could cause global foreign direct investment (FDI) to shrink by 5%-15%, according to an UNCTAD report published on 8 March. The UN trade body had projected earlier a stable level of global FDI inflows in 2020-2021 with a potential increase of 5%. Now it warns that flows may hit their lowest levels since the 2008-2009 financial crisis, should the epidemic continue throughout the year. COVID-19’s negative impact on investments will be felt strongest in the automotive, airlines and energy industries.
Therefore, we must take steps in light of the global FDI to attract investments and also reallocate budget for the economy.Promotional activities should be taken for the development of key backward industry for our exports and also for other industry to create a secondary option to China. Formation of a task force with the private sector to identify the key areas is also needed. The allocation of budget on all the sectors might be revisited and reallocate funds to priority sectors given the current economy and state of global environment.
In the year 2019-20 the budget for Health Service Division was BDT 19,944 crore which was BDT 17,269 crore in 2018-19 and BDT15,386 crore in 2017-18. Allocation for Ministry of Health and Family welfare was in an around BDT 5000 crore. The amount seems to be much less for a fully equipped health sector.In the up-coming Budget allocation for this sector needs to be ready for better health education, research and development.
Government needs to enhance spending & giving budgetary supports to many sectors including to redouble its spending on public health and medical infrastructure including research & innovation.