The Coronavirus outbreak has profound impact on global economy and human lives worldwide. This outbreak has already triggered the fear of global recession affecting industrial production, global supply chain, aviation & hospitability industry, retail business, demand for products & services and jobs. Meanwhile, UNCTAD estimated global growth would slow down maximum 1.5 percent in 2020 and ILO warned about 25 million jobs could be lost worldwide due to outbreak. ADB predicted earlier that Bangladesh economy may contract by 1.1 of GDP with 894,930 job loss. Bangladesh has already experienced a disruption of supply chain of RMG industry, Leather and Pharmaceutical Industry, SME, tourism and aviation.
The geo-economic meltdown also affected the major export destinations of Bangladesh like European Union (EU), USA, UK and Canada. To tackle the outbreak, many EU countries and other part of the world have enforced lock-down which results into shut-down of high-street retail businesses and trade network to the large extent. In the wake of this, export of Bangladesh to these destinations have fallen. This downward trend of cross-border trade is set to undermine both the local and export oriented industries of Bangladesh. Of the export basket of Bangladesh, large export sector RMG alone is going to incur $2 billion export loss and pharmaceutical, leather and agro processing and other sectors may incur substantial amount of loss. Amidst this looming situation, private sector-the lifeline of economy, needs to be supported for the economic interest of Bangladesh.
In line with this, to keep economic effects minimum, DCCI put forwards some timely and economic recovery friendly recommendations in terms of policy measures and reforms.
DCCI requests Bangladesh Bank to create an Emergency Fund with 1% interest using foreign exchange reserve to support the financially stressed businesses for paying salary of their workforce. In addition, Bangladesh Bank can waive bank interest of affected export oriented manufacturing sectors for next one year. Alongside, other promising export sectors can be brought under the scope of EDF scheme. Bangladesh bank can also consider extension of repayment period for worst affected businesses. Alongside, for the liquidity in banking sector, Bangladesh Bank may relax the Cash Reserve Ratio (CRR) threshold for next 1 year. It is worth mentioning that the recent precautionary measures of Central Bank including credit repayment flexibility, time extension of EDF and back to back LC are apparently private sector friendly.
For MSMEs, We recommend to create a Low Cost Financing Facility which can be linked with existing Re-financing scheme of Bangladesh Bank. To support the smooth operations of MSMEs across the board -VAT on commercial rent, electricity, gas and water bills and license renewal fees can be withdrawn for next 1 year.
DCCI also feels, as a fiscal burden reduction move of the private sector, Government may waive all forms of AT and VAT for both import and local stages including food and essentials items, health, hygiene instruments, medical kits and export oriented manufacturing industry for next 1 year which will help businesses to turn-around to the some extent. Alongside, NBR may consider individual and corporate tax concession to support the victims.
In a bid to protect the people and economy from the adverse impact of coronavirus, DCCI urges Government to bring together its global allies and partnership in a coordinated endeavor. DCCI also feels Government may approach emergency financing facilities of IMF, ADB and the World Bank as an alternative financing stream against low internal revenue trend. Alongside, Government may negotiate with international development partners seeking interest waiver of the debt payment for next 1 year.
DCCI also feels for greater socioeconomic balance, the social safety net can be expanded encompassing all vulnerable and marginalized people especially daily labourers, job loss victims and informal micro and small businesses as this informal sector is the key actor of local SME industry supply chain process. To help the safety net, DCCI feels sales limit and strong market monitoring of daily essential commodities need to be strongly enforced to ensure fair price for mass people.
DCCI hails all decisions of the Government for the economy in the given time so far. However, DCCI affirms and supports any future measure of the Government to control the spread the ripple effects of coronavirus on the economy. We also feel consideration of these opportune recommendations will enable private and public sector to underpin our local economic growth and overcome the global crisis.