Published on The Daily Star
We often hear, particularly before the announcement of the annual budget, that the budget should be poor friendly. While this demand sounds very emphatic and appropriate given the socio-economic condition of Bangladesh, what it really implies is an issue to be explored. In Bangladesh, poverty has been a long standing and unresolved phenomenon in the economic and social landscape.
Over the years, Bangladesh has progressed much in most of the economic indicators — from GDP growth to sectoral improvement to social advancement. At the time of its independence, more than 80 percent population of Bangladesh was living below the poverty line, and life expectancy was 46.2 years in the early 70s. The country was still recovering from the devastating war. Hence, the objective of poverty reduction took the centre stage in the first five-year plan (1973-78) of Bangladesh. In 2011, forty years on of our independence when the sixth five-year plan (2011-15) is being formulated, poverty is still the major challenge of the country.
Achievements during these forty years are impressive on many accounts. Over the last ten years or so, the country has been able to achieve a growth rate of 5.8 percent per year on average, which is far better compared to other least developed countries. This steady growth has significant impact on poverty reduction. With spectacular export and remittance performances and increased import capability, the country has also integrated itself into the global economy at a larger extent than before, while the dependence on foreign aid has reduced substantially. Population below the poverty line came down to 40 percent in 2005 from 48.9 percent in 2002 and 56.6 percent in 1991 (according to Household Income and Expenditure Survey 2010 it is expected to come down to around 31.5 percent). Per capita annual income increased to $685 in 2010 from $90 in 1973 and life expectancy increased from 46.2 years in 1974 to 65.4 years in 2006. And the list of successes goes on.
Sadly enough, fruits of such progress could not be distributed equally among all sections of the society. There has been asset creation and wealth accumulation among a group of people, which is a good sign as many of them are successfully contributing to the development of the country through employment creation. However, a large section could not get the pie of the economic advancement of the country as the income inequality rose during the 1980s, 1990s and 2000s.
Those with minimal or no resource are the people who are afflicted with poverty due to a lack of opportunity to take part in the economy with no skill, no education, no asset and no health. They lack capability of all types. In most cases, their poverty is intergenerational and chronic. It is like a trap, in the language of economics, a “vicious cycle” which makes them travel round and round over the same poverty passageway for years after year, decades after decade. In order to bring them out of this poverty maze, mere resource allocation is adequate. Massive, broad-based and concerted efforts are required with the focus on employment creation which can generate income for them on a sustainable basis. The employment trend could not keep pace with labour force of the country as the growth of employment has been 2.9 percent during 1974 to 2006 whereas the labour force grew by 2.8 percent during the same period. Again, those who are employed may not necessarily be employed throughout the year. Major sources of employment in Bangladesh are the agriculture and informal sectors. As a result, a large number of people remain underemployed because of seasonality of agricultural production and low income in the informal sector.
It is expected that the issue of addressing poverty through gainful and sustainable employment for the people located at the bottom of the pyramid will once again feature prominently in the upcoming budget for fiscal 2011-12 as the present government is politically committed to make Bangladesh a middle income country. In doing so, allocations are made for poverty reduction and social safety net programmes in the national budget every year. It is encouraging to note that allocations for social safety net porgrammes as a share of total budget increased from 8.4 percent in fiscal 2006-07 to 14.8 percent in fiscal 2010-11. And in terms of the percentage of GDP, such allocations have doubled during the last five years. The share of expenditure for safety net programmes reached 2.5 percent of GDP in fiscal 2010-11. The forthcoming sixth five-year plan proposes an increase in public expenditure on safety net programmes to 3 percent of GDP in fiscal 2014-15. Ironically, this will still be far below even the South Asian average allocation on social protection, let alone be the European standard. Understandably, such limited resources cannot meet the demand of all. In 2005, the number of households below extreme poverty who could be covered through safety net programmes was only 13.1 percent of total households. Moreover, there were unequal distributions across various regions; the more poverty stricken divisions received less resources compared to those better off.
Given the requirement of the poor, increased budgetary allocation for various programmes is necessary. However, it is time to address the poorest of the poor through separate and targeted porgrammes and allocations since the very nature and extent of their poverty are different from the ‘poor’ who live in absolute poverty (with threshold of <=2,122 kilocalorie per person per day). As mentioned above, separate programmes are needed as this section is the most vulnerable ones — the ‘ultra poor’ with a threshold of only <=1,600 kilocalorie per person per day. In 2005, the share of population in this category was 7.8 percent as opposed to 17.8 percent in 1991-92. Unless this marginalised section is uplifted from their historical poverty trap, poverty reduction strategies cannot be successful and development cannot be sustainable. The issue has been raised many a times at various forums. Hopefully, the issue of addressing the ultra poor will receive due attention in the upcoming budget.