'The most vulnerable will be people's jobs as the aftershock of the coronavirus will hit the country’s employment generation hard, with production being hindered for lack of working capital'
Business leaders and economists have underlined the need for a comprehensive bailout package comprising easy and interest-free loans to keep up production and employment generation in the country as Covid-19 continues to wreak economic havoc across the globe.
This package, they say, will help businesspeople facing a working capital shortfall caused by payment delay or unused stockpiles of goods to keep their factories running and thus avoid jobs cuts.
“We welcome the prime minister’s package of Tk5,000 crore for the export-oriented industry. But there are many other sectors, including SMEs, which generate lots of jobs,” former Dhaka Chamber of Commerce and Industry (DSCCI) president Abul Kashem Khan told Dhaka Tribune.
"The most vulnerable will be people's jobs as the aftershock of the coronavirus will hit the country’s employment generation hard, with production being hindered for lack of working capital," the business leader forecasts.
Therefore, he suggests the government declare a comprehensive bailout package which should not be less than 3% of GDP.
Meanwhile, the United Kingdom has announced a loan package of £330bn to businesses in an “unprecedented” declaration of financial support to shore up the British economy as the coronavirus outbreak escalates, reports the Guardian.
The US senate on Wednesday passed a $2 trillion coronavirus rescue package which will fundamentally transform the US government by placing thousands of businesses and millions of workers on federally-funded life support.
India has announced a $22bn (£19bn) bailout for the country’s poor to help counter the economic effects of the Covid-19 outbreak.
China's authorities plan stronger steps to revive their economy hit by the spread of coronavirus. The ruling Communist Party's Politburo said on Friday it would step up macroeconomic policy adjustments and pursue a more proactive fiscal policy, state media reported.
Citing these examples, Kashem observed that these loans were mainly aimed at the SMEs and the focus was on providing working capital to generate employment.
Echoing him, economists have also stressed the need for a bailout package for businesses.
"Fund injection is very important since if businesspeople can run their factories, there will definitely be employment. But, for running factories, businesspeople will need working capital," Policy Research Institute Executive Director Ahsan H Hansur told Dhaka Tribune.
So, the government should announce a bailout package so that the business community does not face any crisis of working capital, he suggested.
"There are some good companies with a shortage of capital and our goal is to create jobs so that we can give them funds for employment generation,” he added.
Besides the bailout packages, both businesspeople and economists suggest a fiscal policy, including tax waivers, so that manufacturers could adjust cost and get cash flow easy.
For a certain period, the government can waive tax for the SME sector, while it can reduce corporate tax for big businesses, which ultimately increase cash flow in the industry and increase investment, paving the way for employment, Abul Kashem Khan pointed out.
He also urged the government to work with chambers and associations to effectively use the bailout package as they had the proper ideas and link with small businesses. Besides, it would also help prevent a misuse of funds.
“Giving tax waivers or revising the tax rate for businesspeople will give them some respite. Deferred payments of electricity, gas and other utility bills can help generate some funds,” according to Zahid Hussain, former World Bank lead economist in Dhaka office.
He also suggested identifying the most vulnerable groups, the support they need and the method to deliver such support to these groups.
Impact on the formal and informal sector should be assessed on an urgent basis and upgraded accordingly after a certain interval, the economist suggested.
In a recent blog post, IMF Chief Economist Gita Gopinath said: “Governments should consider measures like cash transfers, wage subsidies or tax relief, while central banks should be prepared to provide liquidity to banks and companies."
Bangladesh has so far confirmed five deaths from Covid-19, a new strain of coronavirus, which according to worldometer has infected 597,267 people and claimed the lives of 27,370 people worldwide till 1pm Saturday. 133,373 infected people have also recovered across the world.