Development economics textbooks portray Bangladesh and Turkey as the two success stories of human development and poverty reduction, given their recent achievements. However, as in many other countries, the COVID-19 pandemic has created a crisis in both countries over distorting macroeconomic indicators such as an apparent decline in economic growth, an acceleration in unemployment, inequality and poverty.
In addition to recent reports from international organizations such as the World Bank and the United Nations Development Program (UNDP), several studies by governmental and non-governmental research organizations have shown that the pandemic poses a serious threat to the existing poor and the economic situation of people living just above the poverty line , has pushed millions of people below the poverty line.
Poverty During the Pandemic
To measure the impact of the pandemic on poverty in Bangladesh, the South Asian Network on Economic Modeling (SANEM), a private research organization, recently conducted a telephone survey of 5,577 households.
The SANEM survey found that the upper poverty rate increased from 21.6% in 2018 to 42.0% in 2020, while the lower poverty rate increased from 9.4% in 2018 to 28.5% in 2020 is.
While the upper poverty rate has almost doubled, the lower poverty rate has almost tripled, an abnormal increase in just three years. In addition, the poverty rate has risen in both urban and rural areas.
On the other hand, a recent study by a group of Turkish economists claims that Turkey, like Bangladesh and the rest of the world, may face the same crises at home.
Policies and Programs
In this section, we take a brief look at the policies and programs both countries have put in place to tackle the poverty caused by the COVID-19 pandemic, and ultimately provide a way forward.
Bangladesh has issued 23 COVID-19 stimulus packages with a total cost of $ 14.42 billion, representing 4.44% of its gross domestic product (GDP) of $ 323 billion. Bangladesh’s stimulus packages were designed to provide low-cost loans to affected industries and service sectors to ensure food security, improve social protection and provide special allowances and incentives to the new and existing poor.
Some packages are aimed directly at the poor, for example the allocation of US $ 34.88 million for poor seniors, the allocation of US $ 26.69 million for the disabled, the allocation of US $ 24.42 million for widows and women who have been abandoned by their husbands and an allocation of $ 11.63 million for rural self-employment opportunities.
Recently, an additional $ 13.95 million was allocated to include the poor, widows and women abandoned by their husbands in government allowances in the 2021-2022 budget year.
However, economists and politicians are not as optimistic about the implementation of this massive stimulus package. They fear that the financial packages could be ineffective due to poor execution, unplanned resource allocation and poor accountability.
The stimulus package in Bangladesh is not in favor of the poor as much of it is credit-based as the government provides interest rate subsidies.
In addition, the lack of capacity and efficiency of the public administration system is a major challenge in implementing a large stimulus package.
Worryingly, media reports show that corruption also hinders the implementation of these packages at the local level.
The Turkish experience
On the other hand, the Turkish government’s economic stimulus package is comparatively more diverse and multifaceted than that of Bangladesh. Turkey has the 21-point stimulus package “Economic Stability Shield” worth 15.4 billion.
The stimulation-driven measures apply mainly to banks and are intended to provide liquidity to the Turkish markets. The government has taken several urgent measures to support corporate liquidity and ensure business continuity.
Fiscal measures include tax breaks and deferrals, as well as loan guarantees and loan repayment delays. Thus, the package introduces a mix of financial support, loan support and employment-related measures to support citizens and businesses during the COVID-19 crisis.
In addition, since mid-March 2020, various government agencies have taken several measures through various decrees, legislative changes and collective laws to offer companies in trouble the necessary support through legal, tax and financial incentives.
In addition, several key initiatives directly benefiting the disadvantaged have been launched in order to reach the population at risk;
- Defer sales tax (VAT), withholding tax (WHT) and social security contributions for 6 months for more than 2 million taxpayers
- To postpone income tax returns and payments for 1.9 million citizens
- Provide $ 2.65 billion in cash compensation
- Provide $ 930 million in minimum wage support
- Raise the lowest retirement pension to $ 200
- $ 133 in aid to over 2 million citizens
More importantly, Turkey is very ready to share its experience in fighting COVID-19 with the world. Turkey has organized training courses on “Methods to Combat COVID-19” in various countries, particularly in Central Asia and Latin America.
The Albanian Prime Minister Edi Rama noted the Turkish experience and rightly said: “Turkey is one of the countries where we have the opportunity to exchange experiences and follow them closely through continuous communication. The Scientific Committee of Turkey is of particular importance. Thanks to previous experience, Turkey was one of the best prepared countries when the outbreak broke out. “
A common sense call
In light of the above discussion, we would like to conclude that Bangladesh and other developing countries should learn from Turkey’s experience in fighting COVID-19 how the country has been transparent and accountable in implementing its stimulus package.
In order to ensure that the management and distribution of the stimulus package is overseen, the establishment of an independent and credible national oversight committee can be very effective.
This committee should represent various stakeholders, including government agencies, non-governmental organizations (NGOs), civil society, business and workers’ organizations.
We must not forget that the cost of mishandling the financial packages is very high given the nature of the current humanitarian crisis.
We must therefore give the situation the urgent need to overcome human suffering, especially in the poorer communities.
* Economist based in Dhaka, Bangladesh
** Ph.D. Candidate in Islamic Economics and Finance at Istanbul Sabahattin Zaim University