The novel coronavirus has a major impact and changed the economic paths of

countries all over the world. It should not be surprising if the developing
countries like Bangladesh, India, and Pakistan would face the brunt of the
epidemic in terms of economic hardship. Even having rich economic position
like the United States is facing economic difficulties. While it is too early to
determine how Bangladesh's economy will respond to the problems and again it
is complicated that policymakers remain aware of the fundamental concerns so
that they can take initiates to avoid a severe economic crisis.

According to a news piece in the Bangla newspaper Prothom Alo on July 24,
2020, states about a surge in the premature withdrawal of National Savings
Schemes recently (NSS). Many savers, facing with declining salaries as a result
of the epidemic, may have felt compelled to withdraw their funds from the NSS.
Bangladesh issued Tk 57,805 crore in national savings certificates (NSCs)
between July 2019 and May 2020. NSCs were sold for Tk 46,794 crore within
the same time period. This demonstrates the current pandemic's negative
influence on Bangladesh's economy.

Is there any reason to be concerned in light of the foregoing scenario? If so,

what is the reasoning? To respond to the first question, we must know how the
government funds its expenditures. Taxes (mostly income taxes and VAT in
Bangladesh) and debt are the two main sources of government funding. NSS is
a major non-bank borrowing source for the Bangladesh government. The DNSB
sold NSCs worth Tk 11,011 crore between July 2019 and May 2020. Between
the target amount and the actual amount available, there is a clear difference of
roughly Tk 9,000 crore. Given the current state of the NSC market, it would be
unduly optimistic to expect early withdrawals from the NSS to slow down any
time soon. If the government decides to undertake strong stimulus plan, the
situation will worsen. To fund its budget, Bangladesh's government may borrow
money from Bangladesh Bank. Bangladesh Bank may contemplate "creating"
additional money in order to meet the government's borrowing demand. Printing
additional money to fund government spending is a dangerous business since it
can lead to higher inflation. Both repo and reverse repo rates have been lowered
by Bangladesh Bank. As a result, commercial banks will be able to borrow
money from Bangladesh Bank at a cheaper interest rate. This is likely to raise
the liquidity of commercial banks, which could contribute to an increase in
inflation.
For decades, the United States has had extraordinarily low inflation rates. In the
United States, increasing the money supply has had little effect on inflation. If
the US's inflation rate rises unexpectedly, the country will be in serious trouble.
This, on the other hand, is a different matter that requires its own debate. The
government may consider reorganizing its spending priorities and allocating
more resources to sectors that will have the greatest impact on people's lives.
Another successful anti-inflationary technique is to improve the credibility of
the central bank. After all, most, if not all, economic agents are logical humans
who plan ahead.