Business Desk :
Bangladesh is seeking $700 million in financial assistance from the International Monetary Fund to mitigate the economic impact of the coronavirus crisis, Tokyo-based Nikkei Asian Review reports.
The government hopes the move will prevent the coronavirus pandemic from ravaging its trademark macroeconomic stability.
“We are currently assessing the government’s request to the IMF for emergency financing,” Ragnar Gudmundsson, the fund’s representative in Dhaka, told the Nikkei Asian Review.
The plea coincides with Prime Minister Sheikh Hasina’s announcement on Sunday of a $9.0 billion stimulus package, equal to 2.5 per cent of gross domestic product, aimed at cushioning the economic blow from the lockdown induced by the coronavirus outbreak.
The rescue package is meant “to keep the economy moving, minimize hardship for the population, especially the more vulnerable, and preserve social stability,” said Gudmundsson.
Sheikh Fazle Fahim, President of the Federation of Bangladesh Chambers of Commerce and Industry, said the package’s targeted measures will revamp economic activities by boosting liquidity, sustaining business operations and slashing unemployment.
To maximize the use of funds, he said, the top chamber is working with the finance and commerce ministries and the Prime Minister’s Office to make sure smaller companies, many of which have no access to banking finance, can leverage the stimulus outlays.
“The idea is to keep economic activities running as much as possible,” Fahim told Nikkei.
Small and midsize enterprises will receive $2.35 billion as working capital from banks at 9%, of which the government will subsidize 5%. The package also includes around $3.5 billion in subsidized loans to industrial and services sectors, $600 million for the textiles industry, and another $600 million for pre-shipment credit refinancing. In addition, export funding has been lifted from $3.5 billion to $5 billion.
But this will fall short of the total needed, which has prompted Bangladesh to turn to the donor community for balance of payments and budget support.
BoP posted a modest surplus of $132 million in the seven months to January, but pressure could build in the coming months, as sagging demand in virus-hit Europe and the U.S. drove March shipments of textiles, the country’s key export item, down by 30%.
Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh, a Dhaka-based think-tank, is unconvinced about the success of the relief package, saying the authorities have put too much emphasis on the economic recovery, overlooking the first and second pillars-containing COVID-19 and food security of 40 million poor people.
“You’re trying to revive the economy keeping the pandemic active,” Mansur told Nikkei. “It’s an incoherent strategy.” He added, “The first pillar [disease control] is getting the least attention.”
Furthermore, he is skeptical about financing the package since the banking sector has no additional wherewithal, because banks will not receive deposits in the next six months and their income will take a hit because of the moratorium on loan repayment.
The package gave no clear indication of how banks will mobilize money, or whether the central bank will launch refinancing, offer partial risk guarantees or opt for quantitative easing.
Mansur of PRI highlighted one downside. He said that, for example, directors of one bank, whom he called “self-serving clients,” could eat up most of the rescue cash in collusion with their peers in another.
“This is dangerous in the Bangladesh context,” he said. “Deserving companies may not get loans.”
Bangladesh is seeking $700 million in financial assistance from the International Monetary Fund to mitigate the economic impact of the coronavirus crisis, Tokyo-based Nikkei Asian Review reports.
The government hopes the move will prevent the coronavirus pandemic from ravaging its trademark macroeconomic stability.
“We are currently assessing the government’s request to the IMF for emergency financing,” Ragnar Gudmundsson, the fund’s representative in Dhaka, told the Nikkei Asian Review.
The plea coincides with Prime Minister Sheikh Hasina’s announcement on Sunday of a $9.0 billion stimulus package, equal to 2.5 per cent of gross domestic product, aimed at cushioning the economic blow from the lockdown induced by the coronavirus outbreak.
The rescue package is meant “to keep the economy moving, minimize hardship for the population, especially the more vulnerable, and preserve social stability,” said Gudmundsson.
Sheikh Fazle Fahim, President of the Federation of Bangladesh Chambers of Commerce and Industry, said the package’s targeted measures will revamp economic activities by boosting liquidity, sustaining business operations and slashing unemployment.
To maximize the use of funds, he said, the top chamber is working with the finance and commerce ministries and the Prime Minister’s Office to make sure smaller companies, many of which have no access to banking finance, can leverage the stimulus outlays.
“The idea is to keep economic activities running as much as possible,” Fahim told Nikkei.
Small and midsize enterprises will receive $2.35 billion as working capital from banks at 9%, of which the government will subsidize 5%. The package also includes around $3.5 billion in subsidized loans to industrial and services sectors, $600 million for the textiles industry, and another $600 million for pre-shipment credit refinancing. In addition, export funding has been lifted from $3.5 billion to $5 billion.
But this will fall short of the total needed, which has prompted Bangladesh to turn to the donor community for balance of payments and budget support.
BoP posted a modest surplus of $132 million in the seven months to January, but pressure could build in the coming months, as sagging demand in virus-hit Europe and the U.S. drove March shipments of textiles, the country’s key export item, down by 30%.
Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh, a Dhaka-based think-tank, is unconvinced about the success of the relief package, saying the authorities have put too much emphasis on the economic recovery, overlooking the first and second pillars-containing COVID-19 and food security of 40 million poor people.
“You’re trying to revive the economy keeping the pandemic active,” Mansur told Nikkei. “It’s an incoherent strategy.” He added, “The first pillar [disease control] is getting the least attention.”
Furthermore, he is skeptical about financing the package since the banking sector has no additional wherewithal, because banks will not receive deposits in the next six months and their income will take a hit because of the moratorium on loan repayment.
The package gave no clear indication of how banks will mobilize money, or whether the central bank will launch refinancing, offer partial risk guarantees or opt for quantitative easing.
Mansur of PRI highlighted one downside. He said that, for example, directors of one bank, whom he called “self-serving clients,” could eat up most of the rescue cash in collusion with their peers in another.
“This is dangerous in the Bangladesh context,” he said. “Deserving companies may not get loans.”
