Originally posted in The Business Standard on 31 May 2023
The past year has witnessed a significant decline in the incomes of both the poor and the middle to upper-middle-income classes. The government’s cost-cutting measures, combined with the economic slowdown resulting from the Ukraine-Russia war, have led to this unfortunate situation.
Moreover, the highest inflation rate in a decade has compelled people, even those whose incomes have remained stable, to curtail their consumption of goods and services. As a result, the poor in our country are facing unprecedented difficulties in recent years, grappling with diminishing income and soaring inflationary pressures.
In light of this crisis, it is imperative for the upcoming budget to prioritise support for the poor. The government must increase the allocation for social safety net programmes while ensuring transparency in beneficiary selection and efficiency in the distribution system. However, the lack of government interest in this regard raises concerns about the current reality of lower revenue generation and the feasibility of financing such initiatives.
While there has been a slight increase in the allocation for the social security sector and new programmes are undertaken each year, the increase in allocation fails to keep pace with the growth of the GDP. Moreover, the amount allocated remains negligible compared to the number of poor people in the country.
Unfortunately, many of the allocations in the social security sector do not truly benefit the most vulnerable individuals. A significant portion of the social security budget is dedicated to pensions and allowances for government employees.
Additionally, interest waivers on savings certificates, which amount to over Tk10,000 crore, are being considered part of social security. However, we must question how many poor people possess savings certificates or struggle to pay interest on loans. By excluding allocations for the affluent, the net allocation for social security becomes alarmingly low.
It is vital to separate government employees’ pensions, savings certificates, and interest from the realm of social security. Despite repeated calls for change, this unfortunate reality persists. Furthermore, the social security sector should adopt a universal approach, ensuring that every citizen is covered by the government’s plan with corresponding allocations. Universal social security guarantees protection to those living below the extreme poverty line or in dire circumstances, shielding them from severe crises brought about by disasters. The time has come to seriously consider such measures.
Given the current context, the allocation for social security should be expanded to accommodate the newly impoverished, particularly individuals who have lost their jobs and income due to the Ukraine war. The Bangladesh Institute of Development Studies (BIDS) has reported the emergence of approximately 30 lakh new poor due to the adverse impacts of the war. Policymakers responsible for the budget must assess this new poverty, especially in urban areas, and take appropriate action.
To ensure accountability and transparency, the government should establish a comprehensive database of poor individuals. It is disheartening to note that those who should rightfully be on the list are excluded while influential individuals help those who do not require assistance to be included. Moreover, there are numerous cases of individuals on the list who do not receive the aid they are entitled to, facing numerous hurdles in accessing the support they desperately need. It is crucial to address these issues to optimise the utilisation of the allocated funds.
While our social security programs primarily cater to rural areas, there has been a gradual increase in urban poverty. The BIDS has identified nearly half of the urban poor as new entrants into poverty. Therefore, it is imperative that the list of beneficiaries be regularly updated to account for these individuals in the social security programme.
Most social security programmes currently provide a meagre monthly allowance of Tk500-600, barely exceeding a day’s wage for a labourer. The government should avoid the tendency to make symbolic allocations for the poor, as such amounts lack the purchasing power to meet even the most basic needs of individuals.
Increasing the allocation for the poor necessitates additional funds, a challenging task in the current economic climate. However, initiatives like implementing progressive income tax, curbing tax evasion, and introducing wealth and inheritance taxes can alleviate this financial strain and generate the necessary resources.