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Maintaining coherence between economic and social goals – Dr Fahmida Khatun

Published in The Daily Star on Tuesday, 18 April 2017

MACRO MIRROR

fahmida-khatun-column-feat3Social sector budget traditionally receives less attention amidst big allocation for the hardware part of the economy. Infrastrucutre, power, industry, agriculture and the like are the centre of focus during budget formulation. But the social sector holds together the rest of the economy without which many of the economic achievements can become meaningless. The momentous GDP number can lose its shine if education and health sectors lag behind. The objective to reduce poverty and inequality may remain unfulfilled if allocation for the poor and marginalised, through social safety-net programmes, is insufficient.

Expenditure on education and health as percentages of GDP, as well as budget, has increased to some extent in recent years. However, the extent and pace of increase are both low. Allocation for health was 0.74 percent of actual GDP both in FY2015 and FY2016, while expenditure for the sector was 0.69 percent and 0.73 percent, respectively. The health budget is abysmally low. As a result, out-of-pocket expenditure for health in Bangladesh is one of the highest in the world. Resources for social safety-net programmes hover at around two percent of GDP. Though the absolute amount of allocation for social safety-net programmes has been increasing over the years, its share in total budget and in GDP is going down. Consequently, the target of the Sixth Five Year Plan to spend three percent of GDP for social safety-net programmes could not be met. It was revised downward to 2.3 percent of GDP in the Seventh Five Year Plan (7FYP). This target seems to have already been achieved. However, this number has two problems. First, the allocation itself is too low compared to the requirement of a large number of poor people in the country. Second, allocation for social safety-net programmes includes pension for government employees and their families. This reduces the actual allocation for social safety-net programmes for the poor to only 1.44 percent of GDP.

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illustration: michael morgenstern

Interventions through various programmes in the social sector have contributed towards improving its performance. Two major programmes, namely ‘Primary Education Development Programme (PEDP)’ and ‘Health, Population and Nutrition Sector Development Programme (HPNSDP)’, can be cited here. Admittedly, Bangladesh has performed well in enrolment and reducing differences between households and between genders in primary education. However, the number of school dropouts and children out of school is still high. Quality of primary education is another major concern. PEDP reveals that ‘learning outcomes’ measured as ‘mean score in Bangla and Mathematics’ for grade III and grade V have declined in 2016 compared to 2011. On the other hand, HPNSDP, implemented during 2011-16, had 40 health indicators along with a number of targets to be achieved by 2016. Several of these targets remained unachieved. On a positive note, the programme has received allocation for running for another five years. Hopefully, all health indicators will be achieved during its new implementation phase.

With the objective to broaden the scope of social security from the narrow safety-net concept, the government has developed a National Social Security Strategy (NSSS). This is to be implemented gradually under the 7FYP. This strategy revisits social security system by combining tax-funded social safety-net programmes with contributory social insurance and employment regulations. This is a positive initiative. But its effectiveness is constrained as the majority of employed people in Bangladesh are engaged in the informal sector. The initiative to formulate provident fund for the informal labour is praiseworthy. This will help achieve the objective of broadening social security. But the challenge, however, is the implementation of NSSS during the 7FYP. It requires more resources. As it stands, the financing mechanism of the NSSS looks unclear. Implementation of the NSSS also needs coordination among various ministries and departments of the government.

A disaggregation of the expenditure pattern of the NSSS reveals less promises for the most needed sections of the society. Since the inception of the NSSS in FY2016, allocation for only pension for government employees has significantly increased. Pension is 31 percent in the revised FY2016 budget and 37.4 percent in the actual FY2017 budget. This was 27.9 percent in FY2015 before the inception of the NSSS. On the other hand, programmes for people from various age groups, which are called life cycle programmes, receive much lower allocation in the social safety budget. For example, old age allowance received only 71.6 percent of NSSS target in FY2016 and only 53.5 percent of the NSSS target in FY2017. A similar situation is observed in case of child school benefit and allowances for vulnerable women.

In sum, the upcoming budget for FY2018 has to deliver much more on the social sector. It has to go beyond the status quo allocation. Both resource and composition of allocation are critical for better outcome. Higher allocation for the social sector is needed for maintaining coherence between economic and social goals. Resource for safety net programmes is needed to address both income and human poverty. Allocation for education and health sectors has to increase substantially to reach at least the national expenditure targets set for the 7FYP. Government pension should be decoupled from social safety-net budget and the full amount for social safety budget should be channelled to the marginalised and the poor. Government pension should rather be part of the broader social security plan that will include people beyond government employees.

 

The writer is the Executive Director at the Centre for Policy Dialogue.

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