Brac University’s Institute for Governance and Development (BIGD) has done a deep dive into the government’s handling of the Covid-19 crisis. Netra News has already published a column relating to a survey which formed part of the report — but there is much more of interest within the report.
Its analysis of the government’s “stimulus packages” is particularly fascinating.
These were measures designed to mitigate the economic impact of certain business enterprises and to provide relief to those who were losing their livelihoods because of the lockdown. Although they were called “stimulus packages”, as the report points, many of the 20 items were in the nature of ‘relief and rescue’ rather than stimulus.
Failure to use funds
The first point made in the report is that over half of the promised funds were not even utilised. So instead of the Tk 1,107 billion, only Tk 484 billion was spent. The report states:
Taking the package as a whole, it may be seen that less than half (43.7 percent) of the allocated fund was disbursed by the end of October, 2020. It may be noted that the vast majority of the programmes were announced in April 2020 or early May, and with a few exceptions, all of them were supposed to have been implemented in full within a few months. Yet, after 6 months, only two programmes were implemented in full — viz. Salary Support to Export-oriented Manufacturing Industry Workers and Sale of Rice at BDT 10 per kg to Affected Poor People — which together accounted for only 5.2 percent of the total fund. For the rest of the programmes, the rate of utilization was just over 40 percent. To utilize less than half of the allocated funds during a period when the country needed the support the most indicates a serious failure of implementation. (emphasis added)
This included all the money that was allotted for three of the programmes never being spent:
– Special Honorarium for Doctors, Nurses, Medical Workers;
– Expansion of Export Development Fund; and
– Additional Procurement of Paddy
In relation to the “Special Honorarium for Doctors, Nurses, Medical Workers’, the report stated:
“no fund was disbursed even after six months because the Health Ministry apparently failed to prepare a list of deserving beneficiaries!”
Apart from these three, less than half of the allocated money for eight other programmes was used including for example one titled, “Expansion of Allowance Programmes for the Poor “where only 3%” of the allocated Tk8.15 billion was spent.
Source of funds
The report states that the government’s impression that it is offering “4 percent of the GDP or more … is far from the truth.”
The support package had three distinct sources of financing.
The government budget, or the fiscal burden, is only one of them, and it is not the biggest one. The other two sources are (a) creation of new money by the Bangladesh Bank and (b) utilization of idle liquidity of the banking system.
The fiscal burden of the government is according to the report:
no more than 0.5 percent of GDP i.e., at most one-eighth of the total fund was supposed to come from the government budget.
A much bigger source of fund is the creation of new money which “amounts to about 1.5 percent of GDP.” The rest of the funds comes from the commercial banks’ own resources.
The beneficiaries
Which economic actors are the direct beneficiaries of this government package?
A close look at the list of programmes reveals that the support was aimed at two broad groups of actors — (1) economic enterprises which were badly affected by the economic collapse brought by the lockdown and (2) households or individuals who had lost their entitlements to food and other essentials of life as their livelihoods disappeared due to economic collapse. … We can thus identify two different orientations of the support programmes — namely, growth-orientation and protection-orientation.
The report goes onto state:
It is obvious that the economic support package is heavily biased towards growth-orientation as opposed to protection-orientation. In terms of funds allocated, nearly 80 percent went towards growth-orientation and only 20 percent for protection orientation. While growth-orientation funds accounted for 3.8 percent of GDP, the protection-oriented funds accounted for just 0.8 percent.
It is evident that the primary objective of economic support was not to provide direct protection to the millions who had lost their livelihoods due to the lockdown but to revive economic growth. To the extent that the support was to reach the poor people, it was to happen mostly indirectly as revival of growth was supposed to revive livelihoods as well.
Did it help the poor?
The report asks: how well did the strategy serve the poor? In particular, how well did the strategy of reaching the poor indirectly through livelihood revival, as distinct from direct protection, work in practice?
A survey carried out jointly by the Power and Participation Research Centre (PPRC) and the Brac Institute of Governance and Development (BIGD) on a sample of 7,638 households between June 20 and July 2 found that more than 60 percent of the poor and low-income population who suffered income losses because of the coronavirus-induced economic downturn did not receive any support from the public and private sectors. Only 39 per cent of households got some assistance between April and June, but it amounted to a paltry 4 percent of their lost income (PPRC-BIGD 2000b). In an earlier survey of the same set of households, it was found that they had lost up to 80 percent of their income immediately after the lockdown (PPRC-BIGD 2000a). If food and cash support provided by the government helped recover a meagre 4 percent of lost income, it is hard to imagine how the marginalized groups could have avoided shortage of food because of these programmes as claimed by the Ministry of Finance.
The report then goes onto state:
The inadequacy of livelihood restoration was no accident; it was an inevitable consequence of the nature of the strategy itself. While the government claimed that it was focussing on growth revival with the objective of restoring livelihoods, in reality it’s growth-orientation did not have a corresponding employment-orientation. This is because growth revival was sought by concentrating support mainly on large-scale enterprises, which offer far fewer employment opportunities compared to smaller enterprises, where the bulk of the employment comes from.
As to why the Government chose this particular strategy — this is discussed in the Netra News column, but is worth repeating. The report says this:
What has driven the policy choice is what the present government perceives to be its primary source of political legitimacy — namely, the ability to deliver robust economic growth. While the approach adopted by the government in designing the economic package might seem contrary to what a pandemic-induced crisis would normally demand, it is actually quite consistent with the government’s chosen strategy for achieving political legitimacy.
//DB
The article appeared in the 
on 24 September 2021