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War hit private sector harder than pandemic
AHSAN HABIB
The business sector in Bangladesh has been going through severe challenges for the past four years, which, for many, have been the toughest period in decades, with the coronavirus pandemic being the dominant factor in the early part before the Russia-Ukraine war broke out. Today, we are running the first report of a series to present how various sectors fared in the face of the two unprecedented shocks.
Companies in Bangladesh have been hit harder by the global turmoil induced by the Russian-Ukraine war than the crisis inflicted by the coronavirus pandemic. The balance sheets of the firms listed on the stock exchanges gave some idea about the fallout of the shocks from the twin crises.
Earnings data published on the Dhaka Stock Exchange showed that among 260 listed companies, 184 companies suffered a fall in income in the fiscal year of 2019-20 compared to the previous year when the pandemic hit Bangladesh.
On the other hand, the number of companies whose earnings declined in the first half of 2022-23 rose to 191. The impacts of the war were severe in the half.
In 2020-21, when the pandemic was still raging at home and abroad, the number of companies that made lower profits stood at 83. The number rose further to 133 in 2021-22, whose last quarter already saw some impacts of the war.
Combined profits of the listed companies dropped 41 per cent year-on-year to Tk 7,488 crore in the first half of FY23, way higher than 13 per cent decline seen in 2019-20.
“The businesses are witnessing more impacts now owing to the war,” said M Anis Ud Dowla, president of the Bangladesh Association of Publicly Listed Companies.
The noted entrepreneur said as businesses were in the recovery stage from the pandemic before the war, the impact from the conflict was much deeper than the health-related crisis. In fact, the war dimmed the prospects of the recovery.
Bank, non-bank financial institutions and mutual funds were not included in this analysis as they were more impacted by other issues than the war or the pandemic. For example, banks and NBFIs were impacted by the single-digit interest rate regime while mutual funds were affected by the ups and downs of the stock market.
In 2021-22, the profits of the listed companies bounced 44 per cent to Tk 19,323 crore.
Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue, said at the height of the pandemic, domestic activities were shut though export-based factories were open while SMEs and informal economies were impacted badly.
SWIFT RESPONSES FROM GOVT, BB AFTER PANDEMIC HIT
In Bangladesh, the first Covid-19 case was detected on March 8, 2020, before spreading across the country in the subsequent months, forcing the government to implement lockdowns between March 26 and May 30 to tame the virus. Economic activities came to a screeching halt during the two-month period.
Still, large companies and listed firms did comparatively better as they received subsidies and benefits in various forms and had access to low-cost loans, aided by the central bank’s 10 major stimulus packages involving Tk 189,000 crore and another $3.5 billion extended under the Export Development Fund.
The funds were part of the Tk 191,919 crore stimulus packages that the government has unveiled so far.
Banks have been offering loans at a single-digit interest rate since April 2020 in line with a central bank instruction, pushing down the costs of businesses.
Besides, borrowers were able to avoid slipping into the default zone by paying no instalments on their loans in 2020. They had to pay 25 per cent of the unpaid instalments in the following year.
The war impacted the formal economy and large companies in the forms of a hike in fuel and energy prices, raw materials, the US dollar, and higher inflationary pressure.
“But the government did not unveil supportive measures seen throughout the pandemic. Rather, it was focused on austerity measures. So, large companies were impacted this time,” Moazzem said.