The pandemic of Coronavirus overwhelmed almost all countries in the world about the same time, taking them by storm. Having no parallel in terms of rapid spread, scope and severity, it became a watershed event in recorded history. By all means, it has been the Black Swan of the century, an unforeseen calamity with catastrophic consequences.
The immediate impact of Covid-19, the technical term by which the pandemic is called, has been on public health and healthcare system. Hard on its heels has followed the deepening consequences all across the economy, in developed, emerging and developing countries. As a concomitant fallout of both, the welfare of people, particularly those with fixed and low income, has been significantly eroded. A nationwide public health emergency and economy-wide downturn caused by the pandemic has seen governments in all countries grappling with interventions to cope with the unfolding crisis. Requiring almost simultaneous measures in health, welfare and economic sectors, the coronavirus pandemic became a test case in policy response as soon as it appeared. Here is a brief review of how the policy regimes of governments have fared so far in respect of the task called forth by the pandemic.
Pandemic being a health emergency, the first impact has been on the public health system and healthcare institutions of the countries afflicted, invoking the urgent use of health policy. Demonstrating a rare case of commonality, the health policy in all countries as reflected by their healthcare system, preventive and curative, have been found wanting, quantitatively and qualitatively. All the countries faced shortages of doctors, nurses and other relevant staff, hospital beds and essential equipments to test and treat people infected with the virus. In view of the rapid spread of the pandemic and resultant increase in the number of patients it is understandable that the health personnel and beds in hospitals would be in short supply compared to the requirement. The challenge here was how fast the shortages could be overcome by taking emergency measures within the overall health policy. In Europe, including the UK and America, additional beds were arranged by setting up specialised makeshift hospitals in auditoriums and stadiums. In Bangladesh, a number of hospitals, in both public and private sectors, were `dedicated' for treatment of covid patients. To meet the shortages of doctors and nurses, retired health personnel have been mobilised in Europe, UK and America for emergency service. In Bangladesh the response has been to fill up vacant posts of two thousands doctors and six thousand nurses immediately after the outbreak of the pandemic. Commendable as the step taken has been, the vacant posts of so many health functionaries revealed the poor state of the health sector in Bangladesh. If these posts could be filled up within a matter of days, one wonders, why were these kept vacant for so long and at what cost to the health system?
While it was easy to fill up the gaps in the disposition of health personnel in developed and developing countries through mobilisation of retired personnel and emergency recruitment, meeting the requirements of equipments like medical masks, personnel protection equipments (PPE) and ventilators posed acute difficulties. The supply chain of these items were not in place and ready to meet the demand immediately. Though no official data is available, not a few of the casualties, particularly among frontline health workers who required masks and PPE's, have been due to these shortages. What is more, the scramble for essential equipments like masks, PPE and ventilators gave rise to unsavory wrangling between authorities within and among countries. The alleged commandeering of a plane-load of medical masks meant for Canada by America from Singapore airport is a case in point. In Bangladesh emergency purchase of masks and PPE exposed corrupt practices over purchase and procurement in quite a few hospitals involving hospital staffs, bureaucrats and so called syndicates with political background. The health policies in all countries affected by the pandemic have thus showed their inadequacy, ineffectiveness and embedded malpractices in different degrees. While the government's readiness, adequacy and efficiency in coping with the pandemic have come under severe criticisms, the role of the private sector has not been above board. The overall experience with health policy almost in all countries have highlighted the need for drastic revision to strengthen the capacity of the healthcare system, both in terms of quantity and quality.
The pandemic and its handlings by governments have also shown the urgent need of treating health as a `public good', and make adequate provisions to address the needs, both during normal and emergency situations.
As a preventive measure against the spread of pandemic a common action taken by governments has been total lockdown of offices, shops, business and industrial units, lasting from two to four months. The immediate result of this step has been stoppage of payment of salaries, wages of the employed and income for the self employed and the employers. While employers and owners of industrial and corporate bodies required financial assistance in the short-term to kickstart production of goods and services, the low income earners and employees who suddenly faced loss of income and wages needed help almost immediately to make both ends meet. This required intervention in the form of fiscal and monetary policy. Here different examples of interventions have been seen between developed and developing countries. While developed countries gave priority to the use of fiscal policy, supplemented by monetary policy, in developing countries like Bangladesh and India the opposite has been the case. In America the entire amount of $3.0 trillion in the form of stimulus packages meant for the unemployed, small business and industries came in the form of fiscal policy. The Federal Reserve cut basic policy rates to allow greater liquidity to banks so that they can meet the demand for credit for business and industries. Payment of employment benefit in America at the rate of $600 per month (and later $400) has been made as a grant and paid as part of fiscal policy; similar is the case in Europe. In developing countries like Bangladesh and India monetary policy has been chosen as the main vehicle to provide financial assistance, in the form of stimulus, to the affected sectors, including the low income groups. In Bangladesh the allocation of Tk. 250.0 billion as a stimulus for the poor, who became unemployed because of pandemic, at the rate of Tk. 2500 per month for each family for a period of two months has been made out of fiscal resources. Because of the haste for payment, perhaps not all of the target group members were enlisted and as such the effectiveness of this measures may have been limited. Also question has been raised about the adequacy of the amount given as assistance to a family. The first and more comprehensive stimulus package given by the government out of its own resources has been the payment of Tk. 50.0 billion to export-oriented industries, mainly garment. The decision in this regard was made before the stimulus packages were finalised for all the sectors.
As regards the producers of goods and services, America, UK and Europe have used fiscal resources to provide assistance in addition to bank credit. But developing countries like Bangladesh has relied mainly on the monetary policy in this regard. The difference in approach in the use of the two policies in developed and developing countries appears to be on the basis of attitudes towards public debt. All the countries in the world are saddled with heavy burden of public debt at present. But while developed countries seem more confident of managing public debt to expand their fiscal space, developing countries like Bangladesh seem to think that use of public debt to meet emergent expenditures during pandemic will compromise their development expenditures using the same tool. If opting for monetary policy can meet the requirements during the emergency presented by the pandemic, there may not be much to argue against it. But the banking sector in Bangladesh, India and most developing countries, burdened with huge amount of non-performing loans can not be expected to be readily willing to implement stimulus packages prepared at the initiative of the government. The delay and tardy progress of distributing funds under the various stimulus packages in Bangladesh, amounting to Tk. 1.03 trillion (Tk1,03,117 crore), have shown the weakness of this strategy to use monetary policy in lieu of the fiscal. With deficit budget hovering below 7 per cent of GDP and the overall debt-GDP ratio below 40 per cent, there is room for further borrowing to meet emergency expenditures like the one at present.
The important thing is to weigh the strengths and weaknesses in terms of adequacy and effectiveness of fiscal and monetary policies when facing an unprecedented crisis like the coronavirus pandemic. It is not known if any such comparative study has been carried out in the context of the stimulus packages and their economic implications. In the light of past experiences with similar economic crisis when both demand and supply were affected, it is felt that fiscal policy should have precedence over monetary policy in the recovery and stabilisation programme for the economy.
In Bangladesh the initial decision to implement the stimulus packages on the back of monetary policy has been modified subsequently. Considering the lukewarm interest of commercial banks to implement the stimulus packages with their own funds, Bangladesh bank has decided to provide re-finance payments to the banks to the tune of 50 per cent of the amount given as loan under the programme. In addition, for loans in some sectors like the small and medium scale business and industries, credit guarantee will be given by Bangladesh Bank. If these incentives given to commercial banks are financed out of the funds of the central bank, this will be part of the monetary policy, the difference being that the burden will be shared by Bangladesh Bank with the participating commercial banks.
The role of fiscal policy, however, is not limited to the involvement of the government in the implementation of the stimulus packages. The annual budget for 2020-2021 that has been finalised shows the sectors where additional resources have been allocated to meet the emergency caused by the pandemic. Leaving aside the question of whether allocations are adequate to meet the requirements, their provisions in the budget indicates that fiscal policy has not been absolved of its responsibility to cope with the health emergency and its economic consequences.