Social safety spending to rise Tk1,500cr in FY24
Allocation and number of beneficiary elderly, widows, and disabled persons will go up
The Ministry of Finance has decided to expand the social safety net for the elderly, widows, and disabled persons, increasing the number of beneficiaries by 7.35 lakh in the upcoming fiscal 2023-24.
The ministry is also going to raise the monthly old age allowance and widow allowance in the new budget after a decade-long break, in light of the recent surge in commodity prices.
The decisions – finalised at an inter-ministerial meeting held at the secretariat yesterday – will result in an additional expenditure of Tk1,526 crore in the next financial year, sources at the finance ministry said.
Officials present at the meeting that was presided over by Finance Minister AHM Mustafa Kamal proposed to increase the amount of allowance and beneficiaries in various categories, including old age allowance, widow allowance, and disability allowance, due to the recent surge in inflation and the upcoming national elections.
According to the documents presented at the meeting, the social welfare ministry had proposed to increase the number of beneficiaries under all the schemes – old age allowance, widow allowance, disabled student stipend, and disability allowance – by 23,74,000, which would require an additional expenditure of Tk3,445 crore.
However, the finance minister rejected the proposals to raise the number of beneficiaries and allowances in all categories. Citing the latest labour force survey data published by the Bangladesh Bureau of Statistics (BBS), he told the meeting that the number of poor people in the country has decreased so it will not be logical to increase the numbers of beneficiaries in all categories.
Officials of the Finance Division told The Business Standard (TBS) that among the 7.35 lakh people who will come under the social safety net in the next financial year, 5.35 lakh will be people with disabilities.
Additionally, the number of beneficiaries of the old age allowance and widow allowance will increase by one lakh each, and the monthly old age allowance is going to be increased to Tk600 from Tk500, while the monthly widow allowance will be raised by Tk50 to Tk550.
Speaking on this matter, economists, however, told TBS that only Tk9,000 crore is being given to more than one crore beneficiaries of the social safety programme which gets an allocation of more than Tk100,000 crore. To eliminate this disparity, coordination should be ensured between all the schemes in this sector, they added.
Tk500-600 per month would not have been allotted for a person if the social safety net programmes were really aimed at improving the living standard of the marginalised and poor people, they commented, adding that it is not possible to buy anything with this amount in the present economy.
In the budget for the current fiscal year, Tk1,13,576 crore has been allocated to the social safety net sector. But, out of this hefty amount, merely Tk7,465 crore is meant for 1,06,41,000 persons receiving old age allowance, widow allowance, disabled student allowance, and disability allowance.
A large portion of the money allocated to the social security sector is spent on pensions of government employees, interest on savings bonds, various government-run funds, and construction of various small infrastructures including cyclone centres.
The International Monetary Fund has suggested the government not show the pension disbursements and savings bond interest expenses the safety net allocation from the next financial year.
Data from the Bangladesh Bureau of Statistics show that the inflation rate in the country is currently over 8%, the highest in the last decade. In addition, the government has raised gas and electricity prices several times to reduce high subsidy pressures as part of meeting the IMF's loan conditions, fuelling further hikes in food prices.
According to the estimates of the Centre for Policy Dialogue (CPD), the food inflation rate has been around 25% over the last year and the monthly food expenditure of a family of four excluding fish and meat is more than Tk7,000.
According to the data from another research organisation, the South Asian Network on Economic Modeling (Sanem), 37% of people in the country are unable to eat three meals a day due to inflation.
In such a situation, the ministries involved in implementing the social safety net programme had proposed to increase the coverage and allowances under the social security, but the finance ministry did not give much importance to the proposals in view of the poverty reduction data.
Officials who participated in the meeting also said that even though the IMF suggested strengthening the social safety net by increasing the prices of gas and electricity in the future and withdrawing subsidies, there will be no major changes in these areas in the upcoming budget.
An official of the Disaster Management and Relief Ministry told TBS that his ministry implements the employment programme for the ultra-poor.
In FY22, the allocation for this programme was Tk16,500 crore, which has been slashed by Tk500 crore in the current fiscal year's budget.
In view of the inflation situation and the upcoming general election, the ministry was hoping to get additional allocation for the programme to create employment opportunities for more people in the new financial year, said the official.
What do economists say?
Fahmida Khatun, executive director of the CPD, told TBS that the Ukraine-Russia war has diminished financial security for many before they could recover from the impact of the Covid pandemic. So it was expected that the number of beneficiaries of the social security programme will be increased in the next budget.
Apart from that, the purchasing power of people has fallen a lot due to recent inflation. Considering this, she thinks at least Tk1,000 should be given to the beneficiaries of social security, she said.
"It is true that the government is under some financial pressure. But the government has to take a little extra pressure to make the life of poor people easier," added Fahmida Khatun.
She also thinks some changes should be made in the government's priorities.
Economics professor of Dhaka University and Executive Director of Sanem Dr Selim Raihan said, "Besides increasing the size of the social security programme, increasing the per capita allocation for the poor in this sector has been suggested, but its reflection is not seen in the new budget."
Selim Raihan asked for increasing the allowance for the poor in line with the current market.
Proposals by various ministries
Currently, one lakh disabled students get stipend every month. Students with disabilities in primary level get Tk750 per month, secondary level students get Tk800, higher secondary level students Tk900 and students studying at even higher levels get Tk1,300 per month.
The stipend programme will cost the government Tk95.64 crore this year.
For the next fiscal year, the Ministry of Social Welfare proposed Tk1,100 per month for primary students, Tk1,300 for secondary students, Tk1,400 for higher secondary students, and Tk1,600 for tertiary level students. This would cost the government an additional Tk48.89 crore.
The Finance Division, however, has not taken the proposal into account and said allocations for the next fiscal year will be made as it is this fiscal year.
The government gives an allowance of Tk850 per month to the disabled. Tk2,429.18 crore have been allocated this year to provide this facility to 23.65 lakh disabled persons.
The Ministry of Social Welfare had proposed to increase the number of beneficiaries to 5.35 lakh in the next budget and fix the amount of monthly allowance at Tk1,000. The Finance Division agreed to increase the number of beneficiaries as per the proposal but did not agree to increase the allowance. As a result, there will be an additional expenditure of Tk549.53 crore in the next fiscal year.
Most people getting the facilities under the social security net are old-age allowances. In the current fiscal year, Tk57.10 lakh senior citizens are receiving allowance at the rate of Tk500 per month, which will cost the government Tk3,444.54 crore in the current fiscal year.
In FY17, the amount of allowance for senior citizens has been increased from Tk400 to Tk500 but the rate has not increased despite inflation even after seven years.
The social welfare ministry proposed to add Tk11.49 lakh beneficiaries in the next budget with the amount of old age allowance fixed at Tk600. An additional Tk1,522 crore would have been spent on it.
The finance ministry has decided to increase the number of beneficiaries of old age allowance by one lakh and fix the allowance rate at Tk600. As a result, the new fiscal year will incur an additional expenditure of Tk761.42 crore on the old age allowance.
Apart from this, currently, Tk24.75 lakh widows and abandoned women get an allowance of Tk500 per month. Allocation for this in the current fiscal year is Tk1,495.40 crore.
This rate of allowance was also fixed seven years ago and has remained unchanged ever since. This time, the social welfare ministry proposed to increase the number of beneficiaries to 6.90 lakh with the allowance rate fixed at Tk600.
However, the Finance Division has opined that the allowance rate be increased by Tk50 per month and the number of beneficiaries will be increased by 1 lakh, which means an additional cost of Tk216 crore.