Referring to a World Bank study, economist Zahid Hussain says giving cash to people in need is more effective than food assistance
The success in poverty eradication achieved in the last two decades now appears to be under threat of fizzling out, economists say.
The three-week shutdown and job loss of millions of people working in the informal sector might hurt the progress in this area, observed three noted economists.
They warn that a large number of people will revert back to poverty mainly because of unemployment and food insecurity.
Most of these working people are in the informal sector. Official data says the country has a total of 60.8 million employed labour force. Of them, 14 million are on monthly payroll in the formal sector. Daily wage-earners would account for 10 million,7 million are family helps and 27 million are self-employed—running small businesses or repair works or in other service sectors.
A steady economic growth since the 1990s empowered Bangladesh to fight poverty well. It had successfully brought down the poverty level from 48.9 percent in 2000 to 24 percent in 2016, according to the data of Bangladesh Bureau of Statistics (BBS).
The World Bank, in its Poverty Assessment report released in October last year, praised the success saying "Bangladesh has come a long way in a short time in its fight to end poverty."
"Bangladesh halved poverty rates in a decade and a half, lifting over 25 million people out of poverty," it said, adding however, 54% of the people are vulnerable to falling back into poverty."
The pandemic and the resulting countrywide shutdown has come as a severe blow to those who had managed to come out of poverty mainly depending on their labour.
These people are now out of work. There is no mechanism available to them for filing jobless claims and seeking financial support.
"The success of poverty reduction is now under threat," says economist Ahsan H Mansur, also executive director of Policy Research Institute.
Economists say the poor are becoming poorer and the vulnerable are becoming even more vulnerable in this critical period.
To minimise the shock of the pandemic and maintain the success of the poverty reduction programme the government should take stronger measures now,they suggested.
The shutdown has affected the people working in the informal sectors severely. If the shutdown is extended further, their condition will worsen.
People living in poverty have now become poorer as they are dependent on labour income, said Dr. Zahid Hussain, former lead economist of the World Bank Dhaka office.
Economist Binayak Sen, Research Director of BIDS, says less than one-third of the poor people are now under the government social safety net programmes.
"We do not have any safety programmes for 25 percent of the people who are at risk of poverty," he said.
The financial benefit of the social safety net programmes, however, is not sufficient for a beneficiary to maintain a minimum standard of living.
Around 85 lakh people are entitled to receive various allowances in between Tk420 to Tk820 per month in different categories like old-age, widow, destitute, and abandoned-by-husband.
On average a person needed TK1862 every month to maintain a minimum standard of living in 2016 as per the lower poverty line survey by BBS. Now the amount has increased to Tk2000 due to inflation, according to economists.
These groups of people under the social safety net have now also become vulnerable as this income was not enough for them to maintain a minimum standard of living in the first place and the countrywide shutdown has put them under additional pressure.
Referring to the government's stimulus package of around Tk73,000 crore, Binayak Sen said: "The government announced stimulus packages focused on the economic recovery. But food security, health and social safety should have been given priority in the package."
What needs to be done
Analysing data, the three economists estimate that the number of people now needing government support may stand in between five crore to seven crore.
They proposed radical measures to overcome the situation.
"The allocation of 40,000 tonnes of foods is very little against the current demand," said economist Ahsan H Mansur.
He suggested giving poor people cash instead of food. For this the government will need to spend Tk10,000 crore per month. In his view, five crore people need assistance.
At least Tk2,000 is needed for a person per month to maintain a minimum standard of living.
Economist Zahid Hussain is of the same opinion regarding cash transfer. Referring to a World Bank study he says giving cash to people in need is more effective than food assistance.
He, however, estimates that seven crore people may need support.
If the government wants to give financial support to them, it will require Tk15,000 crore per month, he said.
The estimation of Dr. Binayak Sen is the same as Zahid Hussain.
However, the source of funds remains a major challenge in the current state of the economy that is already under pressure due to a shortfall of revenue and export earnings.
The economists suggested that the government should prepare the plan and negotiate with the World Bank and other agencies for the fund.
For quicker action, the government should borrow the money from the central bank. It is like printing notes to meet the demand.
This will create no risk of inflation at this moment, they assert, as food supply is available.
Meanwhile, the Pakistan government has already started a cash handout programme from Thursday, according to a report published in The Dawn.
A relief programme of more than Rs144 billion was launched on the day. Rs50 billion would be distributed to poor and daily wage-earner families. Each family would receive Rs12,000 for four months through banks.
"On the first day of cash distribution, 40 million people [out of 120m] received text messages (SMS) for collection of the amount from 17,000 branches of two designated banks — Habib Bank Limited and Bank Al-Falah — and 3,000 camp sites established with the assistance of the provincial governments" the Dawn reports.
Nobel Laureates Esther Duflo and Abhijit Banerjee have recently also advocated for bolder social transfers to fight the coronavirus pandemic.
In an article published in The Indian Express, they wrote that to keep the poor at home, a larger amount of benefits must be sent to them directly or the poor would have no alternative but to come out in search of livelihood. They advocated for electronic transfer of such funds to them.
The messages of all the economists are simple: poor people are now out of work, out of income. What they now need is money.