Thinking Ahead

When proposing the budget for the upcoming FY 2015-16, the honourable Finance Minister has reaffirmed the commitment of the government to reduce poverty in Bangladesh. He identified poverty alleviation as the "determinant of our progress". Bangladesh has indeed achieved commendable progress in terms of reducing poverty and extreme poverty. According to the budget speech of the Finance Minister, the extreme poverty rate has come down from 29.9 percent in 2002 to 17.6 percent in 2010 and is projected to go further down to 7.9 percent in 2015. The challenge now is to completely eradicate extreme poverty by 2021.

The Planning Commission has recently published a background paper for the Seventh Five Year Plan. As per the projections made there, even if a GDP growth rate of seven percent is maintained throughout the period from 2015 to 2021, over three percent of the population will remain below the lower poverty line. Hence, growth alone will not suffice if we are to achieve zero extreme poverty by 2021. Of course, the government does not rely only on growth to deal with extreme poverty. It is implementing numerous social safety net programmes that are financed by the national budget. 

Allocation for social safety nets in the proposed budget for the upcoming FY 2015-16 is BDT 37,546 crore, which is 12.72 percent of the total national budget and 2.19 percent of the GDP. In between FY 2009-10 and FY 2015-16, the government has allocated, on an average, 13.69 percent of the total national budget and 2.33 percent of the GDP for social safety net programmes. Despite the government's reiterated commitment to eradicate extreme poverty, we do not see concomitant improvements in terms of allocation for safety nets. 

It also has to be noted that not all allocations under the broad head of social safety nets go for the extreme poor. We have to exclude formal pension schemes and human development programmes, such as stipends and healthcare programmes which do not exclusively target the extreme poor, i.e. they cover moderate poor citizens as well. In fact, there are very few programmes that exclusively target the extreme poor. A background paper prepared for the National Social Protection Strategy (NSPS) has revealed the actual amount allocated in the budget for the extreme poor may be even below 1 percent of the GDP. If we take into account the high inclusion and exclusion errors, this amount will go even further down.

It is obvious that growth alone will not be enough to achieve zero extreme poverty and at the same time, current social safety net allocations also appear to be inadequate. This brings us to the burning question - what more can be done to completely eradicate extreme poverty from Bangladesh? The answer is simple - we need to allocate more resources to scale up successful targeted livelihood programmes.

Targeted livelihood programmes are ones that exclusively target the extreme poor, assist them in achieving sustainable livelihoods and at the same time reduce their vulnerability to natural disasters, economic shocks, social exclusion and so on. Instead of relying on cash transfer only, such programmes usually combine a package of supporting/promoting saving habits, and developing organisational, literacy, asset management, financial and marketing skills. There are many targeted livelihood programmes in Bangladesh that have achieved commendable success and the government itself is involved in many such programmes. Economic Empowerment of the Poorest (EEP) and Char Livelihood Programme (CLP) are two such programmes where the government is involved along with other non-government entities and international donors. Scaling up such programmes or replicating them to address extreme poverty across the country can be a way forward to achieve zero extreme poverty.

While financing targeted livelihood programmes that would eventually help eradicate extreme poverty completely is desirable, it is also not beyond our capacity as an economy. Organisations involved in implementing successful targeted livelihood programmes are claiming that if an amount between BDT30,000 to BDT 39,000 can be invested for an extreme poor household during a spread over 1.5 to 2 years, it can lift that household out of extreme poverty. A background paper for the Seventh Five Year Plan suggests that if 1 percent of the GDP is invested additionally for financing targeted livelihood programmes every fiscal year for five fiscal years, we may achieve the much desired goal of zero extreme poverty in Bangladesh.

We are now investing just above 2 percent of our GDP for financing safety net programmes each year. If we add an additional 1 percent to finance scaling up of targeted livelihood programmes, the amount sums up to be around 3 percent of the GDP. The Sixth Five Year Plan prescribed allocating 3 percent of the GDP for financing social safety nets programmes. While the early years of the plan witnessed safety net allocations worth over 2.4 percent of the GDP, the ratio has eventually come down. The government needs to focus on further increasing allocations for safety nets to reach the 3 percent of the GDP benchmark and this additional allocations need to specifically target the extreme poor, i.e. provide finance for targeted livelihood programmes. Along with this, targeting, distribution and leakage should be properly addressed in order to fasten the pace of eradicating extreme poverty in Bangladesh within a reasonable period of time.

The writer is Professor, Department of Development Studies, University of Dhaka.