'Working capital loans will boost confidence'

The government's bailout package to aid industries and the service sector with working capital loans will boost the business community’s confidence to tackle the coronavirus impact.

Speaking to Dhaka Tribune, business leaders and economists have described the Tk30,000 crore low-interest loan package as a timely move, but said its effectiveness would depend on the proper execution of the fund. 

On Sunday, Prime Minister Sheikh Hasina unveiled a set of stimulus package of Tk67,750 crore.

With the fresh allocations, the total amount of financial assistance from the government amid the Covid-19 now stands at Tk72,750 crore.

Of the four fiscal packages, Tk30,000 crore has been set aside as a loan package at 9% interest to help businesses with working capital through banks.

As per the scheme, businesses will have to pay 4.5% interest while the rest would be subsidised by the government.

“Definitely, it is a timely and good announcement from the government. This announcement of Tk30, 000 crore package to inject working capital, will give a mental support and boost confidence in tackling the coronavirus impact,” former president of Dhaka Chamber of Commerce and Industry (DCCI) Abul Kasem Khan told Dhaka Tribune.

It indicates that government's has prioritised limiting the economic fallout from the COVID-19 pandemic, he said.

However, the bailout package's effectiveness  will depend on the proper execution of the fund and monitoring by the stakeholders, according to Kashem.  

"There are lot of people out of the banking channel. The government should focus on how to include them in this scheme. The Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) and other chambers can be engaged," he suggests.

Economists says that government's stimulus package is a relaxing message for the businesses, who already suffer from cash shortage.  

“Offering working capital loans for businesses would help them cushion the coronavirus impact,” Centre for Policy Dialogue (CPD) Research Director Khondaker Golam Moazzem told Dhaka Tribune.

According to him, working capital loans are one of the most effective measures to keep the production running.

Moazzem, however, said the government should focus on the supply of money as the banking sector now faces a liquidity shortage. 

The economist stressed on proper use of the funds. "The money needs to reach the businesses, who actually needs it. Otherwise, the stimulus packages will fail to serve its purpose."

Describing the Tk30,000 crore working capital loans for industries and service sector as essential, Policy Research Institute’s Senior Economist Dr Ashikur Rahman said that 55% of the manufacturing sector caters to the local market.

“This measure should help mitigate the spike in unemployment as it will allow businesses to hold on to their work force for at least three more months. If this pandemic, however, becomes a two-year phenomenon then, we all have to go back to the drawing board again,” he told Dhaka Tribune.