The coronavirus disease (COVID-19) pandemic has affected the economic and social well-being of Bangladesh in many ways. These include a slowdown in economic activities, significant loss of jobs, sharp decline in exports, and increase in the incidence of poverty.
The country’s gross domestic product (GDP) growth sharply came down to 3.5% in fiscal year (FY) 2020 from 8.2% in FY 2019. The provisional growth rate for FY2021 is 5.5%. In the face of this falloff in growth, the International Labor Organization in November 2021 estimated that 5 million full-time jobs were lost in Bangladesh in FY 2021.
At its worst, estimated unemployment rate was 22.4% within the following quarter at the onset of the pandemic in mid-2020, according to the Bangladesh Bureau of Statistics. Poverty incidence is expected to increase above the pre-pandemic national poverty incidence of 20.5%.
The fiscal deficit is expected to rise above the government’s customary target of 5% at least until FY2023, due to high spending on health, social protection, and relief and recovery measures.
The government's response
To deal with the crisis, the Government of Bangladesh implemented containment measures and announced incentive and stimulus packages totaling $22.1 billion, which was equivalent to 6.2% of the gross domestic product in fiscal year 2021.
The special programs supported the additional expenditure needed to expand the social safety net and stimulate the economy to protect jobs. The programs also focused on meeting the needs of women and vulnerable groups.
ADB in 2020-2021 committed $4.56 billion for projects and programs in Bangladesh including more than $2.6 billion for managing the immediate economic, social, and health-related impacts of the COVID-19 pandemic.
The assistance includes $500 million in rapid budget support approved in April 2020, within around one month after receiving the Government request. This support forms part of ADB’s COVID-19 Active Response and Expenditure Support (CARES) Program, which is funded through the COVID-19 pandemic response option (CPRO) under ADB’s Countercyclical Support Facility. This budget support has built on an earlier concessional emergency assistance and a grant to help provide for the immediate needs of medical supplies and logistics support.
“I am happy to note that ADB was the first development partner to come up with assistance to deal with the immediate challenges of the COVID-19 pandemic in Bangladesh,” says Country Director Edimon Ginting. “It is also heartening that we were able to stand beside Bangladesh when it needed our support the most.”
The package was designed to help Bangladesh strengthen its public health system, speed up the country’s social and economic recovery by widening social safety net coverage, provide salary support to workers in export-oriented industries, and extend low-interest loans to affected industries and farmers.
As a result, the ADB assistance delivered benefits to more than 15 million poor and vulnerable people in Bangladesh. More than 3.8 million workers in export-oriented industries (53% women) received wage subsidies of Tk49.45 billion or $576.3 million. Industries, and micro, small, and medium-sized enterprises, which were affected during the pandemic, received Tk481.50 billion or $5.6 billion loans.
More than 20,800 doctors, nurses and other frontline medical workers received two months basic pay as honorarium.
As of June 2021, Tk5.1 billion was disbursed for total 850,000 newly enrolled old-aged, widows, and husband-deserted women from 112 most poverty-stricken subdistricts. Each of the 3.50 million poor families (0.86 million female-headed households) received Tk2,500 as one-time cash support.
More than 211,117 metric tons of rice was distributed among around 12.93 million vulnerable families (30% female-headed households) with 20 kilograms of rice per month per family.
“I am confident Bangladesh will return to its pre-COVID19 high economic growth path soon by successfully implementing its robust economic and fiscal measures to protect the poor and vulnerable including women, and cushion trade and businesses,” Mr. Ginting says.
Though the $500 million initial ADB assistance was aimed at meeting the immediate challenges of the COVID-19 pandemic, it will also help the government improve its institutional capacity, introduce new tools for service delivery, and improve monitoring and evaluation capacity of the social protection programs. The Asian Infrastructure Investment Bank (AIIB) is supporting the program with $250 million, Japan International Cooperation Agency (JICA) with $331 million, and OPEC Fund for International Development with $70 million in cofinancing with ADB.
Through technical assistance grant support, the program is enhancing the central management information system (MIS) to improve management, monitoring and evaluation of safety net beneficiaries; poverty targeting; beneficiary registration; and service delivery. It is also helping the government to synchronize the MIS with banking and mobile financial service channel’s cash transfer data to improve transparency of the entire system and reduce leakage. A gender responsive plan is being developed to improve the social safety net in the country.
In addition to the pandemic management, ADB is now focusing on promoting a greener socio-economic recovery. ADB has adjusted its program priorities to help Bangladesh overcome the COVID-19 pandemic and challenges related to health and social protection, food security, skills development, rural development, water and sanitation, and the finance sector, among others.
“Bangladesh has managed the ongoing COVID-19 pandemic well so far, through the stimulus and incentive packages and expanded social protection programs under a pragmatic policy to support both lives and livelihoods,” Mr. Ginting says. “Rapid implementation of reforms for improving public investment, expenditure efficiency, domestic resource mobilization, business climate, and boosting competitiveness to support larger role of private sector and economic diversification, as well as promoting small enterprises for local-level job creation are critical to sustaining these gains.”
This article was written by Gobinda Bar of ADB’s Bangladesh Resident Mission.