Originally published in bigd.bracu.ac.bd on 8 June 2020 

The COVID-19 pandemic crisis has led to enforced distancing on a wide scale, an immediate consequence of which is that a large part of economic activities has come to a standstill. The resulting shutdown of the economy, while essential for limiting the spread of infection, has potentially disastrous consequences not just for economic growth but also for the lives and livelihoods of millions of people who have been forced to stop working. Thus we are caught in a cruel dilemma: the economy must be shut down to ensure effective physical distancing, otherwise too many lives will be lost; and yet shutting down the economy has its own dire consequences. This report seeks to present an integrated policy framework to deal with this dilemma in Bangladesh, that consists of a judicious combination of three types of policy instrument: (a) physical distancing through economic shutdown, as a means of containing the spread of infection, (b) bold measures of economic support, especially entitlement support to households, who are facing the spectre of hunger as a consequence of economic shutdown, and (c) a powerful system of public health support, as a means of ensuring that the economy can be reopened ‘safely’. The contents of the policy instruments will have to be calibrated on the basis of a two-phase approach – a first phase consisting of at least three months during which distancing will have to be imposed very strictly resulting in large-scale economic shutdown, and a second phase lasting for at least another six months during which it should be possible to re-open the economy gradually by relaxing the shutdown. For this transition to be possible in the shortest possible time, the government will have to embark upon a bold programme of revamping the public health system on a priority basis, as this will be the foundation on which the economic support programme will be built. The pandemic will inevitably impose an economic cost; the only way to minimise this cost is to put in place a strong system of public health support, which will permit quick reopening of the economy ‘safely’. The paper estimates that at least half of the population has become food insecure in the wake of economic shutdown. This means that some 20 million households will need entitlement support in the first phase. The amount of support needed is estimated conservatively at Tk. 8000 per household per month. In the second phase, when the economy begins to re-open, the number of households needing support will gradually decline. Taking the two phases together, it is estimated that the entitlement support programme will cost Tk. 960,000 million – about 3.8 percent of GDP.

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