Restarting the Economy: A Seven-Point Framework

07.20.2020 | Articles | Dr. Rashed Al Mahmud Titumir

Introduction

Bangladesh requires economic restructuring to address both the damage caused by the Covid-19 pandemic and pre-existing structural problems. The non-pharmacological intervention (general holidays) enacted to contain the virus was formally lifted in May in an effort to revive the economy. However, recovering from a crisis of this magnitude requires long-term prudential planning. This paper proposes a three-year plan to restart and reconstruct the economy. There is no time for lengthy deliberation; this crisis demands decisive action to reinforce the sectors severely hit by the pandemic. New thinking rather than conventional orthodoxy should be the new paradigm. There follows a seven-point agenda to achieve this.

The economy was already in shambles before the onset of the pandemic. Other than remittance earnings, all the macroeconomic indicators encountered decline. The poverty rate declined by 1.2 percentage points between 2010 and 2016 compared to 1.8 between 2000 and 2010. Poverty is at 24.3% in Bangladesh, 21.4% of the population are vulnerable to multidimensional poverty and are at risk of falling into poverty due to economic shock. The Gini index of inequality which declined to 0.321 in 2010 has risen to 0.32.4 in 2016. Illicit capital outflows have been on the rise, revealing frailties in financial regulations.

Covid-19 intensified pre-existing weaknesses in the economy. Income erosion caused by Covid-19 might cause 43.5% of the households to fall below the international poverty line.[1] Exports plummeted in April, with earnings less than half a billion dollars, 82.9% lower than the previous year. According to the Unnayan Onneshan, growth will fall to 4.4% as opposed to the rate of 5.2% estimated by the government.

[1] CPD estimates poverty rate of 35% and SANEM estimates poverty rate of 40.9%