The coronavirus pandemic has severely hit the economy of Bangladesh, as the country was under lockdown for about two months. The government has announced a number of stimulus packages to revive the economy. The national budget for the Fiscal Year 2020-2021 (FY 2021) was announced on Thursday.
One of the key expectations from the budget was to revive the Covid-19 affected economy. In the Fiscal Year 2020, the total allocation for the health sector (Health Services Division, and the Health Education and Family Welfare Division) was 1.02% of GDP which is lower than that of developing countries like India and Sri Lanka. In FY2018, India spent about 1.28% of its GDP for the health sector while for Sri Lanka the proportion was 1.48% in 2017.
Evidently, due to the Covid-19 pandemic, poor, and vulnerable households’ income have dropped significantly, which has reduced their ability to spend for their health. Further, the government may incur additional expenses for medical treatment to coronavirus affected patients if the pandemic continues in FY2021.
Considering all these issues, allocation for the health sector deserved its substantial boost. This will also increase employment in this sector.
The government should be ensuring food security of the poor. Enough food availability is a prerequisite for ensuring food security. The government should undertake appropriate policies to ensure enough food availability through domestic production, because dependence on food imports is not a good option during this uncertain time.
The Covid-19 pandemic has negatively affected the agricultural sector, through a likely fall in wholesale price, capital constraint, labour shortage, disruption in the supply of fertilizer, etc. So, this sector must be provided enough support so that farmers produce more in the next cropping seasons.
The government has announced some support for this sector (a stimulus package of Tk5,000 crore was announced; from this fund, loans with 5% interest rate will be disbursed among farmers). Is the amount enough? According to Dhaka Tribune (July 23rd, 2019), in the Fiscal Year 2018-2019, about 2,989,237 small and marginal farmers received loans amounting to around Tk16,322.87 crore from the banking sector.
These statistics indicate that the stimulus package for providing farmers with loans with a low rate of interest should be at least Tk16,322 crore. So FY2021 should allocate enough money to provide with all the small and marginal farmers with loans at a low rate of interest.
We also needed an increase in the allocation for safety nets substantially. As it came out from a survey conducted by the Power and Participation Research Centre (PPRC) and the BRAC Institute of Governance and Development (BIGD), during the countrywide lockdown, an additional 22.9% people became temporarily poor.
According to BBS estimate, in 2018/19, 20.5% of the total population lived in poverty, indicating that during the lockdown period, about 43.4% of the total population was poor. It is likely that even after the situation normalizes, many of these new poor will not be able to earn enough to escape poverty because it may take time to revive the economy.
So, there needs to be increased safety nets to ensure food security of the poor. The amount of allocation for FY2021 should have been doubled considering the fact that the rate of poverty has almost doubled due to the Covid-19 pandemic.
Employment generation should be another key focus in the coming year. A study conducted by the Asian Development Bank (ADB) shows that nearly 41% of the total employed population in the country are engaged in all the informal sectors except for agriculture.
These sectors (manufacturing, wholesale, and retail trade, transportation, storage, and communications) have also been hit by the pandemic. Hence, in order to revive the economy, they must get attention.
It is likely that RMG exports will fall in FY2021, which is likely to reduce employment in this sector. Similarly, international migration out of Bangladesh may decrease in FY2021. So these newly unemployed people need to be absorbed in other sectors.
Due to the Covid-19 pandemic, health expenditures may increase across the world. This may open opportunities for Bangladesh to increase the export of the pharmaceutical products. So, this sector should be given some support so that it can grow.
As the export earnings of Bangladesh are likely to fall in FY2021, we may need to undertake important substitution policies. For this purpose, the government may provide some support (such as loans at a lower rate of interest) to the infant industries that have the potential to grow. With regard to development expenditure, the government should give priority to labour-intensive projects.
Narayan Das is a Senior Research Fellow, BRAC Institute of Governance and Development, BRAC University. The views expressed are, however, the author’s own.
