Logistics for stimulus package allocation to be finalised by next week

The Daily Star  March 30, 2020

The government has started work on devising a method to allocate its Tk 5,000 crore stimulus package for the export-oriented sectors announced by Prime Minister Sheikh Hasina on March 25.

Now, the finance ministry will form a committee — where the business leaders would also be included – to work out the logistics.

The committee would scrutinise the claims made by the affected export-oriented sectors. The funds would be disbursed after their need assessment, said an official of the finance ministry.

Already, finance ministry officials have held meetings with a number of trade bodies.

A method is likely to be finalised within a week, he said.

Garment comprised 84.21 per cent of Bangladesh’s total exports worth $40.5 billion in fiscal 2018-19 and the sector employs more than 4.1 million workers.

The coronavirus pandemic in the Western world has led to many of the brands shutting down their stores, forcing them to cancel orders or delay shipments.

As of yesterday, $2.80 billion worth of garment export orders were cancelled by international retailers, according to data compiled by the Bangladesh Garment Manufacturers and Exporters Association.

Some 1,016 garment factories reported a loss of 862 million units of work orders. The cancellation will affect 2.05 million workers.

But the domestic market-based industries and the services sector have now been affected too as the government enforced a ten-day shutdown to prevent the spread of lethal, pneumonia-like virus.

Many workers in the informal sector have completely lost their incomes and they do not have any coping capacity.

At the moment, the government’s top most priority is to take steps to ensure food for 100 per cent of the population, Finance Minister AHM Mustafa Kamal told The Daily Star yesterday.

“Once the crisis is over, we will take whatever steps we need to take so that the affected businesses and businesses can return to their pre-crisis level. No sector would be left out. The Prime Minister’s Office and the finance ministry are working on it,” he said.

The government needs to quickly devise a method to disburse the Tk 5,000 crore assistance to support payroll in the export-oriented industries, said Zahid Hussain, a former lead economist of the World Bank’s Dhaka office.

“Since the size of the assistance is less than their monthly wage bill, a formula is needed to determine who gets how much,” he said.

The BGMEA though has sought three months’ wages for its workers.

One simple formula would be to allocate based on the number of workers in each enterprise as a proportion of total employment in the sector. The assistance should be limited to blue-collar workers, all of whom could be paid an equal amount.

The veracity of data on the number of blue-collar workers provided by the industries can be checked against data existing in the Directorate of Inspection of Factories and Establishment.

If it does not have the data, the government could randomly check the payroll registers of the factories directly.

“To make sure the blue-collar workers actually get the money, the disbursement could be made conditional on submission of payment receipts signed by the workers. This will require the factories to pay first and then claim reimbursement.”

There should be cash support initiatives to cover all the affected workers — wage employed and self-employed — in all sectors until the economy gets back to its normal gear, he said.

Financing is a serious constraint on the government budget.  As in previous episodes of livelihood crisis, the rest of the society must share part of the burden, Hussain said.

“I think they will if they could find some trustworthy intermediary who will make sure the money reaches the intended target. We have many well reputed non-governmental organisations who could be used for this purpose,” he added.

The government is looking to secure $750 million from the International Monetary Fund and $200 million from the World Bank to tackle the health crisis and tide over the economy.

The Asian Development Bank has approved $300,000 in emergency grant. The Manila-based lender may provide $500 million in budget support to Bangladesh.

In the meantime, the finance ministry is working to devise immediate and mid-term strategies. The export-oriented industries would be supported under the immediate plan while the rest under the mid-term plan within the current budget.

The ministry is now looking to restructure budgetary allocation as many projects are on pause owing to the pandemic.

The non-export-oriented sectors would be supported from the funds to be freed up through the restructuring of the budgetary allocations and from the funds promised by the development partners, the finance ministry official said.