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Bangladesh fights back COVID-19 challenges, returns to normalcy

Bangladesh, COVID-19, Pandemic, Sinopharm, Prime Minister Sheikh Hasina, A H M Mustafa Kamal, Finance Minister of Bangladesh


Bangladesh fights back COVID-19 challenges, returns to normalcy

As the number of new COVID-19 cases has already dropped to three digits with daily death toll dropping below 10, the country is set to return to pre-COVID situation and bring development activities to normalcy. Meanwhile, Prime Minister Sheikh Hasina on November 22, 2021 directed the officials concerned to bring the development activities back to normalcy like in the situation before the deadly COVID-19 pandemic.

According to Cabinet Secretary Khandker Anwarul Islam, Bangladesh already has vaccinated around 90 million people while 20-25 million vaccines will be given every month by February 2022. It may be mentioned here that the pace of COVID-19 vaccination in Bangladesh is continuing in full swing with a large number of people getting vaccinated every day. Bangladesh though has initially purchased AstraZeneca from India; majority of the population are being vaccinated with Chinese Sinopharm vaccines.

The Cabinet Secretary said, Prime Minister Sheikh Hasina has asked to minimize the backlogs (if any) rendered by the COVID-19 to take the growth rate to the previous position to progress it further again.

It may be mentioned here that, Bangladesh has been achieving tremendous economic growth since 2009 under the statesmanship of Prime Minister Sheikh Hasina. This year, when the country celebrates the 50th anniversary of its victory in the liberation war of 1971 against the Pakistani occupation forces, Bangladesh is already seen by the international community as a role model.

Meanwhile, commenting on Bangladesh’s economy, A H M Mustafa Kamal, Finance Minister of Bangladesh in an article wrote: After achieving above 7.0 per cent growth since FY 2015-16 to three consecutive years, Gross Domestic Product (GDP) growth in Bangladesh has reached 8.15 per cent in FY 2018-19. This feat of achieving continued growth in Bangladesh’s GDP has been praised worldwide.

However, the coronavirus pandemic that poses a major risk to the global economy has also had negative effects on the Bangladesh economy. According to the estimates of Bangladesh Bureau of Statistics (BBS), GDP growth has been decelerated to 3.51 per cent in FY20, which has been estimated to 5.47 per cent in FY21.

During FY 21, the country’s per capita national income stood at US$ 2,227, from US$ 2,024 in the previous fiscal year.

The Honorable Prime Minister announced incentive packages of about Tk 1.28 trillion to address the pandemic crisis and keep the country’s economy moving and bring it back on track. These incentive programmes, which is 4.40 per cent of GDP, are being implemented through 23 packages. Some of the notable activities of this package are to provide special funds for export oriented industries; provide working capital to affected industries and services sector enterprises as well as micro (including cottage industries), small and medium enterprises; increase the benefits of Export Development Fund; increase the coverage of social safety net; provide direct cash transfer to targeted people; and create various funds for the agricultural sector.

In addition to financial incentives, various measures have also been taken to reduce import duty on Covid-19 related health and medical products and provide policy assistance to increase liquidity in the banking sector. Through implementation of this attractive and timely stimulus package, the government has been able to play a highly effective role in employment creation and safeguarding employment, stimulating domestic demand and keeping economic activities moving. As a result, the trend in the Bangladesh economy has started a turnaround towards the high growth trajectory.

Moreover, to address the impact of Covid-19, funds have been allocated in the budget to meet the targets of each ministry and division. The revised budget outlay for FY20 was Tk. 5015.77 billion, which increased by 7.46 per cent to Tk 5389.83 billion in FY21. The government is cautious of limiting the budget deficit to 5.0 per cent by increasing efficiency in revenue management. However, due to the increase in government expenditure against Covid-19 pandemic, the actual budget deficit for FY20 stood at 5.4 per cent. The budget deficit has been estimated around 6.10 per cent of GDP in FY2l. Initiatives have been taken to further automate and digitise income tax, value added tax and customs departments to bring transparency in tax management. Online IT based value added tax system has already been introduced. It is expected that implementation of the ongoing reform programs will help keep the budget deficit within the limit of 5.0 per cent in the coming years.

There has been a negative growth in import and export in FY20. However, both export and import showed a positive move during FY21. Notable progress has been made in the area of remittances due to the provision of incentives at the rate of 2.0 per cent on remittances sent by non-resident Bangladeshis (NRBs) through the banking channel and the easing of the process for sending remittances. The inflow of remittances for FY21 stood at US$ 24.78 billion, up by 36.10 per cent compared to the previous fiscal year. It is expected that this high growth trend of remittance inflows will continue in the coming days. In addition, various initiatives and diplomatic activities by the government have been continued, including those for the expansion of the foreign labor market, skills development and safe migration. As a result of the increase in remittances, the deficit in the current account balance has improved during FY 21, compared to the previous fiscal year. At the same time, due to the US$ 9.3 billion surplus in the overall balance of payments, foreign exchange reserve increased significantly to reach at US$ 46.39 billion on June 30, 2021.

The monetary policy for FY21 has been framed with the dual objectives of supporting domestic demand to stimulate economic growth in coordination with the government’s sustainable development goals, and maintaining price level and achieving macroeconomic and financial stability. To ensure adequate liquidity in the financial system to tackle the financial crisis stemming from the pandemic, the interest rate and the Cash Reserve Requirement (CRR) have been reduced more than once. At present, both the repo rate and CRR are 4.0 per cent. Furthermore, the interest rate on bank loans has been brought down to a single digit or 9 per cent with the aim of creating an industrial and business-friendly environment for the industries, businesses and service sector organizations and enabling them to achieve financial viability in local and international markets.

Apart from economic development, Bangladesh has also made significant strides in the social sector. Bangladesh has been able to achieve the targets ahead of schedule related to hunger, poverty and health in the Millennium Development Goals (MDGs) of the United Nations. The government has adopted ‘Vision 2041’ after the implementation of ‘Vision 2021’ and formulated the Second Perspective Plan (2021-2041) as the strategic policy document for the vision. Implementation of the Seventh Five Year Plan (2015-2020) has been successfully completed. The implementation of the Eighth Five Year Plan (2021-2025) has started. The government has set its goal to become a higher middle-income country by 2031 and a happy and prosperous developed country by 204I.

The government is working tirelessly to tackle the coronavirus pandemic, implement pledges made under the Election Manifesto of 2018, implement the Second Perspective Plan (2021-2041) and achieve the Sustainable Development Goals (SDGs). lt is hoped that through the implementation of the initiatives taken by the government, the expected growth targets will be achieved and the country will move towards continued development.

Bangladesh’s economy during the pandemic

For Bangladesh, although the outbreak of COVID-19 was not that much unexpected when it began spreading in a number of countries, when COVID took the shape of pandemic in March 2020, Bangladesh’s economy faced an unfortunate nosedive as public health took precedence. Years of growth and expansion were bookended by a spell in the economic doldrums, with the tradeoff between lives and livelihoods posing a bid dilemma for the government. While many of the mighty nations were visibly rattled by the pandemic and policymakers seen nervous and confused of their actions, Bangladesh Prime Minister Sheikh Hasina had very efficiently led the nation in overcoming the challenge, while she has managed the required doses of vaccines. While a large number of nations in the world were struggling in sourcing COVID-19 vaccines, Bangladesh government had started vaccinating the people. During these most difficult period, Sheikh Hasina has successfully taken series of steps in containing the spread of COVID-19 by imposing calculated lockdown and vaccinating the people, while she also had brilliant plans of resuming country’s economic progress in full swing at the earliest.

Now, a year on, the green shoots of recovery are emerging rapidly.

New job opportunities are rife as employers look to fill posts that have long lay vacant. Although investments are still short of the expected levels, export and import-oriented businesses are beginning to regain momentum.

Economists and entrepreneurs, therefore, have urged the government to take the necessary measures to reduce risks in trade and commerce to ensure sustainable growth.

Fitch Ratings, a leading multinational credit agency, forecasts 7 percent economic growth for Bangladesh in FY22. The outlook for FY22 is similarly rosy with Fitch expecting growth to accelerate to 7.2 percent.

In a report released on November 8, Fitch assigned a ‘BB-‘ bond credit rating to Bangladesh with a stable outlook.

According to the recent data published by Bangladesh Bank, import expenditures have increased 47.56 percent in the first quarter (July-September) of the current fiscal year compared to the same period last year, currently standing at US$ 18.73 billion.

Meanwhile, export earnings have seen a 22.62 percent year-on-year growth, according to the Export Promotion Bureau.

Bangladesh has exported goods worth US$15.74 billion so far in FY22, which is 13.33 percent higher than the target.

It is evident from the export growth and other indices that the national economy is recovering from the pandemic-induced stagnancy.

According to economic experts, Bangladesh is now in the post-recovery phase, while production has almost reached the pre-pandemic level. The country is expected to get over the negative impacts of the COVID-19 pandemic in the first three or four months of 2022.

With the fact of overall deficit in national trade standing at US$6.50 billion in the first quarter of the 2021-2022 fiscal year, which is three times higher than the same period last year, experts played down concerns over the trade deficit with economic activities picking up speed.

For Bangladesh, higher import spending and a decrease in remittance were a big blow to the balance payments, as migrant workers could not go abroad. But good news is, they have started returning to their work. At this stage, government needs to focus on this. The drop in remittance is temporary and it will be over very soon.

Remittances reached a record high of US$21.7 billion in 2020 and Fitch attributed it to a shift to more formal remittance channels and Bangladesh Bank’s 2 percent cash incentive for inward remittances.

Bangladesh is all set now to resume its pre-pandemic economic activities soon, while many of the nations in the world, including South Asian neighbors, including India are in tremendous difficulty in overcoming the losses caused by the COVID-19 pandemic. For India, export earning as well as foreign exchange remittance will continue to decline for the next few months, while the economy will in extreme crisis even for the next couple of years. With a troubled economy, India will certainly witness rise in unemployment rate as well as poverty, which may become a challenge for Bangladesh as the number of illegal immigrants from the neighboring nation may increase significantly. Currently, over half-a-million illegal immigrants from India are working in various sectors in Bangladesh. The government needs to adopt stricter policies to check the arrival of illegal immigrants from the neighboring nations.

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An internationally acclaimed multi-award-winning anti-militancy journalist, research-scholar, counter-terrorism specialist, and editor of Blitz. Follow his on Twitter Salah_Shoaib

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