Macro Analysis /

Bangladesh: Government comes up with stimulus package equivalent to 2.5% of GDP

  • Prime Minister unveiled a fresh stimulus package of BDT677.5bn, making total stimulus package of BDT 727.5bn

  • Bangladesh general holiday extended till 14 April; stock market will open on 15 April

  • Bangladesh has 117 confirmed COVID-19 cases till today; 33 have recovered and 13 died

IDLC Securities
6 April 2020
Published byIDLC Securities

Bangladesh identified the first COVID-19 patient on March 08 and has reported 117 confirmed cases and 13 deaths till now. At present, the country is experiencing a 20-day long ‘holiday’ from 26h March to 14 April, consisting of a twelve-day general holiday declared by the government (from 29 March to 2 April, 5 April to 9 April & 12 April to 13 April), six weekends, and two public holidays (Independence Day on 26 March and Pahela Baisakh on 14 April). This prolonged shutdown has hit economic activity as both local and foreign demand fell. In these circumstances, Prime Minister Sheikh Hasina has unveiled a fresh stimulus package of BDT677.5bn (approximately USD8bn) in the form of four credit facilities on 5 April 5, 2020. Coupled with the previous BDT50bn (USD590mn) incentive package provided in the form of soft loans to the export-oriented industry, the total stimulus package now amounts to BDT727.5bn (USD8.59bn) or 2.5% of the GDP. 

This stimulus package to be implemented in “immediate, short and long” phases. The main programs include 1. Increasing public expenditure, 2. Formulating a stimulus package, 3. Widening social safety net coverage, 4. Increasing monetary supply. The details of the financial stimulus scheme are attached below. 

1. BDT300bn (USD3.5bn) working capital loan at a subsidized rate

To help the industries and service sector keep afloat, BDT300bn will be provided as a working capital loan through banks. This working capital loan facility will be revolving i.e. the balance at one point of time can reach BDT300bn. The lending rate of this facility will be 9%; half (4.5%) will be subsidized by the government. 

2. BDT200bn (USD2.4bn) CMSME loan at a subsidized rate

The Cottage, Micro, Small and Medium Enterprises (CMSMEs) will get access to the BDT200bn working capital financing scheme. Like the abovementioned facility, this CMSME WC loan will be provided at a 9% interest rate and the government will subsidize by 5%. In essence, the beneficiaries will get the loans at 4% interest rate.

3. Increase EDF size by USD1.5bn (BDT127.5bn); Interest Rate Decreased to 2% 

The Export Development Fund of Bangladesh Bank (the central bank) has been increased by USD1.5bn to facilitate the import of raw materials under back to back LC. Currently, the fund size stands at USD3.5bn which will amount to USD5bn after the increase. The interest rate has also been brought down to 2% from existing LIBOR+1.5% (i.e. 2.73%).

4. Introduction of BDT50bn (USD590mn) ‘Pre-Shipment Credit Refinance Scheme’ 

The prime minister has introduced a new ‘Pre-Shipment Credit Refinance Scheme’ of BDT50bn. The lending rate of this credit facility will be 7%. The fund is also targeted to export-oriented industries for the smooth execution of export orders.

Table: Summary of declared stimulus from the Bangladesh Government
Table #1: Table title
Sl NoScheme NameAmount (BDT bn)Cost of FundBeneficiaryFund source


Working Capital Finance


9% (4.5% by the borrower and 4.5% by the government as a subsidy)

Affected Industries and Service Sector

Commercial banks will give loans from own funds


Working Capital Finance


9% (4% by the borrower and 5% by the government as a subsidy)

SME, including cottage industries

Commercial banks will give loans from own funds


BB Export Development Fund



To facilitate raw material export under back-to-back LC

BB Export Development Fund 


Pre-Shipment Credit Facility



Pre-shipment credit refinance scheme for local products along with export industry

BB Refinancing Scheme


Soft Loan





Source: Prime Minister speech