Coping with the pandemic effectively

Publish: 6:54 PM, July 8, 2020 | Update: 6:54 PM, July 8, 2020

Bangladesh has been adversely impacted by the Corona virus induced crisis.. Up until the crisis, the economy had been growing close to 8 percent a year on average over the past decade. But a significant fall in the growth is apprehended in 2020 though it is early to say definitely about how much that drop may be because it is also anticipated that our economy may bounce back even in 2020 with severity of the corona pandemic ending.
The economic impact has been felt in three main avenues: first, a drop in domestic economic activity, after the shutdown announced on March 26 (now gradually being lifted); the second is a decline in exports of ready-made garments, which represent more than 80 percent of Bangladesh’s exports . But the export sector is showing signs of a resurgence from May. Finally, there has been a fall in remittances from Bangladeshis living mostly in Middle Eastern countries, affected not just by the pandemic but also by the decline in oil prices. But this situation has vastly improved in the last two months.

Thus, we can still expect a pick-up in activity toward the end of 2020 and in 2021, with growth climbing back to at least around 6 percent.Of course, that depends on the domestic economy starting to recover. But there is so much uncertainty and it is very difficult to ascertain with precision the recovery’s speed or extent. We still can expect that the country would quickly come back to previous growth rates, if global economic conditions become also somewhat supportive.

Bangladesh is one of the most densely populated countries in the world, and this is a huge challenge when you are trying to contain the impact of a pandemic like COVID-19. Another challenge is limited health infrastructure. The capacity of the health system is really being put to the test, and requires considerable support from development partners. It is estimated that the country needs about $250 million for clinical equipment, testing, and contact tracing, just to respond to the impact. This amount will need to be mobilized with external support.

International creditors to Bangladesh say that they recognize the reasonablepresence of transparency, accountability, and good governance in Bangladesh. They say its government is committed to using the crisis resources transparently and effectively, and to carry out an audit of COVID-19 related expenditures .Bangladesh has also committed to amending existing rules so as to provide information on the beneficial ownership of companies that are awarded procurement contracts.

Before the crisis, Bangladesh was in a very good position, with a low risk of overall and external debt distress. It is anticipated that all the crisis-related borrowing will raise the public debt-to-GDP ratio to about 41 percent of GDP over the coming years, from 36 percent at the end of 2019.

Even so, debt should remain sustainable. In a way, this is a testament to the sound economic and fiscal policies implemented in recent years, with limited aid dependency, prudent borrowing and, up until the crisis, adherence to a deficit ceiling of 5 percent of GDP. Over the medium term, the government needs to mobilize more resources domestically to fund additional spending for health, education, infrastructure, and social protection.
Since March, several stimulus measures were deployed to sustain economic activity and protect the most vulnerable. There is a package of about $600 million to support the wages of workers in the ready-made garment sector, provided in the form of subsidized loans to companies so that they can pay wages for three months. This is very important because the ready-made garment sector is responsible for much of the recent progress in incorporating women into formal economic activity.

Additionally, takas totaling about $150 million will be provided as cash assistance to about five million families displaced by the pandemic. There are also measures to protect the homeless and for food distribution. Cash allowances for the elderly, widows, and disabled individuals are also being expanded.

Climate change is a priority for Bangladesh’s development objectives, as it is one of the countries most vulnerable to extreme weather events. Increased investments in adaptation have made the country more resilient to natural disasters. Cyclone Amphan, a month ago, was perhaps less devastating than initially feared because of better early warning systems and more investments in embankment infrastructure and shelters. As efforts to promote a green recovery take hold, Bangladesh is also well placed to attract foreign investment that will contribute to climate change mitigation.