Covid hit service, manufacturing sectors hard: BB

Manufacturing and services sectors were hit hard by the pandemic, says a Bangladesh Bank study report unveiled on Sunday.

Other affected sectors are- readymade garments, real estate, tourism, health, education, airlines, transport and SME sectors, the report added.

“The pandemic disproportionately affected various sectors of the Bangladesh economy. Among the three broad sectors, manufacturing sector was hard hit followed by service sector while agriculture sector remained relatively insulated from the shock waves of the pandemic,” Fazle Kabir, Governor, BB said the report.

The BB strongly suggested launching two special bonds to help insulate worst hit industries and individuals affected badly due to the pandemic.

They are-Bangabandhu Centenary Bond (BCB) for reviving the economy and Pro-poor Bond (PPB).

“Government of Bangladesh may float a special bond to mark the 100th Birth Anniversary of Bangabandhu Sheikh Mujibur Rahman, the Father of the Nation to materialise his long-term vision. To make Bangladesh a prosperous and developed nation, as Bangabandhu envisaged, this bond’s fund can be used for Bangladesh’s transition towards a developed economy by 2041,” recommends the BB.

Fund of this special purpose bond may assist in financing the country’s structural changes for generating mass-scaled employments, socioeconomic advancement and empowerment, advancement in digitisation and upcoming mega projects if required. It proposed.

Besides, fund of this bond might be useful for reviving the economy from the COVID-19 shock as well.

“BCB can be a 30-year development bond. It might be issued both in local and foreign currency to attract the local and non-resident Bangladeshi investors. Tax exemption, inflation linkage, quarterly coupon, small denominations and put options can be the special features of this bond to attract the investors.”

On introduction of COVID-19 Pro-poor Bond (PPB), the BB said would help informal sector hit hard by the pandemic.

“The bond will help Informal Sector Job Losing Workers to participate in Public-Works Projects.

Bangladesh Government can issue a special social safety bond to address short-term socioeconomic setback due to COVID-19 pandemic. The proceeds of this bond could be used for the people who have lost their jobs and whose livelihoods have been severely affected during this pandemic, pulling them again out of the poverty line through ensuring employment security,” reads the report.

“ Particularly, this bond can fund projects to tackle unemployment emanated from the pandemic. In particular, government could announce some public work projects for the jobless informal sector workers for a limited time period as a number of countries already took such initiatives.”

Besides, the study report suggested temporary tax rationalization for SMEs also.

“Healthy growth of SME sector is vital from employment perspective. However, as this sector has suffered heavily from COVID-19, Bangladesh Bank has provided refinancing facility to support the sector along-with Government’s stimulus packages after the onset of COVID-19. In addition, Government could rationalize tax for SME sector for the time being for their quick recovery. Several countries also rationalized tax for this sector for a short tenure.”

The findings and recommendations of the study titled “Economic and Financial Stability Implications of Covid-19: Bangladesh Bank and Government’s Policy Responses” were unveiled on the central bank website.

A high official of the central bank said the SME sector would require adequate financial support to revive.

He said recovery might be slow, but steady growth might be achieved in due course if proper financial support was ensured.

The Bangladesh Bank surveyed 59 banks for the study.

The study identified 13 severely affected sectors, and five of them were affected the most – travel and tourism, readymade garment (RMG) and textile, SME, real estate, and education.

In the survey, 51 banks said the travel, tourism, hotel, and restaurant sector was hit the hardest.

Besides, 47 banks identified the RMG and textile sector as the second hardest-hit, 45 identified SME as the third, 32 identified real estate as the fourth, and 28 identified education as the fifth.

Electricity, power and gas; healthcare; and agro-based industries were identified as the least-affected among all sectors.

The report said the devastating impacts of Covid-19 across the globe had brought about unprecedented challenges in the global financial system.

It said amidst this widespread crisis, Bangladesh’s economy is also exposed to the consequential macroeconomic shocks created by the pandemic.

The central bank governor, Fazle Kabir, said in the report the government had declared mass-scaled, low-cost stimulus packages of Tk 1.21 trillion for all sectors of the economy.

He said the central bank had quickly responded to the announcements of these packages by introducing various refinancing schemes, easing the monetary policy, and reviewing the key policy rates to ensure adequate liquidity and fund flows into the financial system.

The banking sector withstood the Covid-19 shocks with notable resilience, which was reflected in its positive outlook in terms of capital adequacy, asset quality, profitability, and liquidity, said the report.

It said the pandemic’s impacts on Bangladesh’s economy seemed to be less severe so far compared to most of the others due to timely policy initiatives by the government and the Bangladesh Bank.

The pandemic disrupted the real estate sector during the second half of the last fiscal year in terms of both demand and supply to varying degrees across different sub-sectors.

Tk 20,000 crore stimulus for CMSME

In line with the government’s Covid-19 incentive package announcements, the Bangladesh Bank on April 13 last year issued guidelines on providing Tk 20,000 crore working capital for the cottage, micro, small, and medium enterprise (CMSME) sector, setting the interest rate ceiling at 9 per cent.

Of the interest, the government will bear 5 per cent as subsidy and the remaining 4 per cent will be borne by borrowers.

Till June this year, banks disbursed 77 per cent of the fund.

The central bank then introduced another fund of the same size for the current fiscal year. The disbursement deadline is June 30 next year.

Till September 9 this year, banks disbursed Tk 500 crore from the fund, as per the Bangladesh Bank’s latest data.

Tk3,000cr fresh refinance scheme for Agriculture sector

Bangladesh Bank on September 15 unveiled a fresh Tk 3,000 crore refinance scheme to provide low-cost loans to farmers with a view to supporting farm production amid the coronavirus pandemic.

The new fund comes after the tenure of the Tk 5,000 crore refinance scheme for the agriculture sector expired in June. The new refinance package will expire on June 30 next year.

Tk500 crore refinance scheme for tourism industry

The central bank also announced at Tk500 crore refinance scheme for tourism industry to clear salary and allowances of their employees.

Stimulus for export-oriented RMG industries

On the eve of Bangladesh embarking on a countrywide shutdown on 26 March last year, the government announced a Tk 5,000-crore special package to pay the wages and allowances of export-oriented industries’ workers for three months starting from April.

Banks disbursed the amount directly to the workers’ bank accounts or mobile financial service accounts. The interest-free loan carried a 2 per cent service charge. The stimulus fund has extended then.