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Containing COVID-19 in Bangladesh

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Homeless and impoverished Bangladeshi people receive food provided by volunteers during the nationwide lockdown to curb the spread of coronavirus (COVID-19) in Dhaka, Bangladesh, 27 April, 2020 (Photo: Reuters/Suvra Kanti Das).

In Brief

COVID-19 is now in Bangladesh. It is one of the world's most densely populated countries with poor healthcare infrastructure, weak logistical facilities, widespread poverty, and inadequate safety nets and income transfer mechanisms. It has not faced a crisis of this magnitude in its five decades as an independent country.

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There is limited awareness among the general population of the nature and seriousness of the virus. The pandemic poses a massive health risk with the potential to spread widely and rapidly, causing huge numbers of deaths. The government seems to finally recognise this threat. It is asking citizens to practice social distancing and safety measures, and is imposing a month-long nationwide ‘holiday’ — a virtual lockdown from 26 March to 25 April 2020.

But despite the government’s call to practice self-distancing, there were mass gatherings held in Bangladesh immediately after the holiday was announced. Millions of people left the cities for villages using crowded transport such as buses, trains and boats. Many families in Bangladesh live in joint family settings, cramped living conditions and crowded villages and urban slums where isolating the old and vulnerable is difficult — if not impossible.

Maintaining Bangladesh’s lockdown is completely infeasible if its citizens cannot be provided with basic living needs. The lockdown is bringing many economic activities to a virtual halt and threatens the viability of industries and firms, and the livelihood of millions of households. Many who had migrated to towns and cities for low-paid, part-time and contractual jobs are now out of work.

To counter the impact on the readymade garment industry — Bangladesh’s main export industry that employs about four million (mostly female) workers — the government initially rolled out a package of Tk 50 billion (US$600 million) to pay wages amid reports of cancelled orders from international buyers. The government also announced measures to assist other sectors, targeting small and medium firms and the agriculture sector. These include low-interest loans (around 5 per cent lower than market rates) to be delivered through the banking system. Together these measures account for about 3.5 per cent of Bangladesh’s GDP.

But the assistance package for the garment industry has been inadequate in preventing large-scale job losses, and the income transfer mechanisms have failed to deliver urgently needed assistance to many communities. The banking system is notoriously inefficient, plagued by high levels of non-performing loans, and has a poor record of delivering credit to low-income groups. It is unlikely that these subsidised loans, distributed through the banking system, will meet the needs of the target recipients who are desperate for finances.

Addressing the plight of these many millions who are now without adequate incomes and jobs is a daunting task. Day labourers and casual workers, as well as many of the self-employed, face severe hardships. Even those who were previously above the poverty line are now being pushed well below it — the ‘new poor’.

Recognising that broad-based support to meet basic needs including access to essential food is critical, the government announced a program to allocate rice to the most vulnerable people. But again, though limited measures are being taken by local government bodies at the direction of Prime Minister Sheikh Hasina, it is not clear how effective this program will be. And with millions lacking adequate incomes, housing and living spaces to practice isolation and social distancing, there is a real danger that the disease may run out of control, jeopardising Bangladesh’s economy and social fabric.

The country has many large hospitals but lacks trained medical professionals, equipment, drugs and maintenance. Patients who can afford to usually seek medical care outside the country — such as in India, Thailand and Singapore. The COVID-19 situation gives them no choice but to remain in Bangladesh. Given the bottlenecks in health care delivery and absence of broad-based social safety nets for millions of poor people, a huge national effort must be made to undertake the necessary measures to avoid catastrophe.

Upscaling and accelerating COVID-19 testing, locating and isolating of potentially infected people, and providing essential medical care and equipment, is critical.

The government must provide basic income and essentials to those who have lost or will lose their livelihood during the crisis. This requires a generous income transfer mechanism to accommodate all low and low-middle income people.

Domestic supply chains must be kept open. Production, distribution and marketing of essential products can be severely disrupted unless producers and distributors are provided direct cash transfers as well as assistance in the form of moratoriums on loan repayments and rents, utilising the extensive network of grass-roots community organisations including well-respected NGOs.

A direct financial support package, including wage subsidies for local informal and formal enterprises and agriculture, is essential. The government must ensure many previously solvent and viable firms — particularly small and medium sized enterprises — do not collapse. These firms now face a serious liquidity crunch and the government must step in with quick and direct assistance.

Bangladesh cannot rely on international assistance at this time. To meet the huge expansion of spending and the resulting fiscal deficits, the government should be prepared to monetise the debt through the central Bangladesh Bank. Money financing of the deficit is unlikely to generate inflation in the context of huge deflationary pressures from the collapse of household and corporate spending.

But this is not a time to worry about fiscal deficit targets or future inflation. This is the time to ensure that the damage and deaths from COVID-19 are contained. Delay and procrastination will be catastrophic. The government must act now and act decisively.

Asad Islam is Professor of Economics in the Department of Economics and Director of the Centre for Development Economics and Sustainability (CDES), Monash University.

Gaurav Datt is Associate Professor in the Department of Economics and Deputy Director of the Centre for Development Economics and Sustainability (CDES), Monash University.

Sisira Jayasuriya is Professor of Economics at the Centre for Development Economics and Sustainability (CDES), Monash University, and Honorary Professor at the Arndt-Corden Department of Economics, The Australian National University.

This article is part of an EAF special feature series on the novel coronavirus crisis and its impact.

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