Raise per capita safety net allowance in budget, an economist urges

The government should increase per capita allowance under its social safety net programmes (SSNPs), particularly for the elderly, widows, disabled and marginalised women, considering the high-level food inflation and the rising cost of living, said an economist.

"It is admirable that the government has expanded the social safety net coverage. Per capita allocation should also be increased taking into account higher inflation," said Sayema Haque Bidisha, a professor of the economics department at the University of Dhaka, during a phone interview recently.

"If we don't raise the allowance, it will not work properly. The allocation for SSNPs should be guided and linked by the National Social Security Strategy of the government."

The government introduced an allowance at the rate of Tk 100 per person in the fiscal year of 1997-1998 and increased it to Tk 500 in FY17. People with disabilities get Tk 750 each.

The economist suggested separating the government employees' pension scheme from the safety net programmes.

This is because although the government raised the safety net allocation by 12 per cent to Tk 1,07,614 crore in the ongoing fiscal year compared to a year ago, a major portion is used as pension expenses.

"This means the real allocation for the poor is far less," she said.

The safety net allocation is 17.83 per cent of the budget and 3.11 per cent of the gross domestic product, data from the finance ministry showed.

But Tk 26,690 crore has been set aside as pensions for retired government employees and their families for FY22, which is more than one-fourth of the allocation.

She recommended the government bring slum-dwellers under the social safety net programmes.

Prof Bidisha, also the research director of the South Asian Network on Economic Modeling, an independent think-tank, suggested the government initiate measures to document all transactions and tag them with the Taxpayer Identification Number (e-TIN), with a view to raising revenue collection.

"Year after year, many transactions have remained undocumented and have not come under direct taxation. In order to ensure higher tax collection, all transactions must be documented and tagged with e-TINs. We need to significantly reform the income taxation structure."

The tax collection as a percentage of GDP is stuck at around 7.6 per cent in Bangladesh, the lowest in South Asia, one of the lowest in the world and the lowest among the low-middle-income countries.

The upcoming budget should aim to increase the investment in the health and education sectors significantly, said Prof Bidisha.

"The investment in the education sector should be youth-centric and target quality educational programmes."

Apart from increasing the size of the budget, the government should ensure budget effectiveness, she said. 

As a labour economist, she recommended giving priority to labour-intensive industries in order to generate more jobs since the pandemic has hurt the labour market.

"The safety net programmes must be planned and centred towards the broad objective of job creation for those at the bottom of the distribution."

She called for an increased in allocation for small and medium enterprises and women entrepreneurs.

"We should set our target to reduce poverty and cut inequality. Our main goal should be to ensure inclusive growth and development."