Originally posted in The Business Post on 23 July 2021
CPD Executive Director Fahmida Khatun talks to The Business Post’s Ibrahim Hossain Ovi in an exclusive interview.
In order to find a smoother path for economic recovery from the Covid-19 fallout, the government should put more focus on the country’s SMEs, the largest job creator, to make it more vibrant through injecting public investment, said Dr Fahmida Khatun, executive director of Centre for Policy Dialogue. Excerpts follow:
How can Bangladesh retain the growth of remittance inflows?
Right now, the remittance inflows are healthy and showing its continuous uptrend. Most of the expatriates, who returned home due to the Covid-19 pandemic, are not being able to return to their respective work stations mainly due to financial as well as vaccination crisis.
Against such a backdrop, the government needs to vaccinate all the outbound migrant workers, who are facing an uphill battle for vaccine registration, and also take all other required steps including financial assistance for ensuring their safe return to their jobs, for the sake of retaining the current remittance inflow growth.
How can the Cottage, Micro, Small and Medium Entrepreneurs recover from the Covid-19 pandemic fallout?
A good number of CMSMEs that are not connected with the banking channels or any other financial institutions could not avail any facilities from the low-cost financing, which was offered by the government to survive during Covid-19 pandemic.
As most of the CMSMEs are mostly doing their business informally, the government should provide them with funds through the microcredit lenders, who are well connected with the CMSMEs along with a wider network across the country.
On top of that, the government should offer fresh funds for the CMSMEs with the assurance that they would get it from the lenders.
How can we sustain export growth?
Most of the export destination countries have more or less completed their vaccination campaign and they are now turning around from the ongoing economic fallout.
With the reopening of the economies in the western world, the demand for goods would soon increase and if we cannot grab these increased orders, buyers will relocate their orders to other countries.
So, in order to get ready for catching up those potential orders from the buyers, the factory owners have to ensure the worker’s health safety along with their personal safety equipment to keep them fit for being able to take orders and to deliver in time.
On the other hand, the government has to take effective measures so that the exporters can import raw materials to produce export-oriented goods comfortably.
There is excess liquidity in banks and a record reserve of forex. Where could it be used?
At present, private investment is going through a dull situation due to the ongoing Covid-19 outbreak, resulting in a huge amount of idle money.
However, there are some investors lacking in funds. The banks can provide them with financing very carefully, so that the borrowers cannot be the willful defaulters.
What should be the government steps to recover from the Covid-19 pandemic?
The Covid-19 pandemic has hit the economy during the last one and a half years and we don’t even know how low it will take to overcome such a situation.
Since there is no sign of recovery as yet, we have to put further focus on bringing the entire nation under the vaccination coverage to pave the way for doing our business as usual.
The more the vaccination, the less there will be health risk. And for this reason, the government should give top priority on setting a target to vaccinate maximum people within a certain period.
What should be the government focus for a smooth economic recovery?
Cottage, Micro, Small and Medium Entrepreneurs create huge employment and contribute about 25 per cent to the GDP, the economic recovery would not be smoother unless this vital sector turns around from the Covid-19 pandemic. They are unable to pay their rents and bills for the electricity service. This is because of the contraction of business caused by the ongoing covid-19 pandemic.
A policy focused on finance and ensuring access to funds is very crucial in this regard.
What should be the government fiscal policy to address the crisis caused by the Covid-19 pandemic?
In case of any crisis, the government fiscal policy is expansionary in providing support to the business community to retain employment as well as investment and to address people’s needs. But it did not reflect in the budget of FY21, which recorded huge infection and death cases.
Public spending should be more people-oriented with special focus on employment generation. But, it is not also visible during the Covid crisis.
Considering the present scenario, the government should increase investment on projects which would create employment and the fiscal policy will make funds available for the business community.
However, the government should be very careful about the misuse or waste of money. In providing funds, strong scrutiny is needed to avert any willful defaulters.
How to increase private investment?
In order to get rid of the economic fallout, we have to address the challenges caused by the Covid-19 pandemic.
Though Bangladesh has witnessed less impact compared to other countries, it stalled economic activities. The country’s informal sector suffered most.
We did not see a significant leap in private sector investment, which was also grim even before the pandemic. The ongoing pandemic has expedited the slower pace of private sector investment.
So, it is high time we thought about how to increase both the private and public sector investment with the main focus on creating employment generation mostly.
With the job cuts caused by the pandemic, people fell into poverty. How to feed these new poor?
As the people’s income shrank, they fell into poverty. Middle income groups also fall to the lower middle-income segment while the poor turned into extreme poor.
Now, the priority should be given to provide these people with employment to pull them out of poverty. And there is no alternative to investment for job creation.
Being hit hard by the ongoing Covid-19 pandemic, people have lost their jobs and are yet to be employed. For about 2.5 crore new poor, the government has to provide cash support especially during any stringent lockdown to contain the surge of Covid deaths and infections.