Budget FY2019-20: Social-sector allocation far from adequate

The population structure of any nation provides the country with a window of opportunity to reap economic and social dividends from the structure. In the language of demographers and economists, this is known as first demographic dividend. The first demographic dividend occurs when the proportion of population in the labour force increases relative to other age groups (e.g. children and the elderly). It is a transitory event that provides a one-time "window of opportunity" for investing heavily in human resource development to accelerate economic growth and social development. With the population ageing, the dependency ratio increases again, the "window" gradually closes, and the dividend is no longer available.

Bangladesh has entered into this window of opportunity in 1990s; it is argued that Bangladesh would benefit from its demographic dividend until sometime between 2031 and 2041. The realisation of a double-digit economic growth depends to a large extent on reaping the maximum benefits of the first demographic dividend. This requires adequate resource allocation to the social sector—education and health sector. Moreover, achieving the Sustainable Development Goals (SDGs) 3 (ensuring healthy lives and promoting well-being for all at all ages) and 4 (ensuring inclusive and equitable quality education and promoting lifelong learning opportunities for all) rests on the adequate funding of these sectors in the national budget.

The expenditure on health is lower than the expenditures on the primary education sector and the education sector. The expenditure on the health sector, which crossed the 6-percent mark just once, in FY2010, remained at around 5 percent for most years of the last decade before dipping to 4 percent in FY2019.

A review of budgetary data of the last 10 years suggests that primary education expenditure has never crossed 7 percent of the total budget between the fiscal years 2009 and 2019. The primary education expenditure reached the peak of around 7 percent of budget only in FY 2010 and FY 2016. Thereafter, a sharp decline in primary education spending has been observed. The expenditure on primary education declined to less than 5 percent of the budget in FY 2019. The expenditure on the education sector, although higher by about 2 percentage points compared to the primary education spending, revealed similar trends with respect to the total budget. The highest expenditure on the education sector has been found in FY 2016 when it reached 9 percent marked in the last ten years. Similar to the expenditure pattern of the primary education sector, the education sector expenditure also dipped after FY 2016. It dropped from 9 percent in FY 2016 to 5.4 percent in FY 2019. The total expenditure on education ranged between 15.6 percent of the budget in FY 2016 and 10.2 percent in FY 2019. In terms of GDP, the education expenditure has been around 2 percent of GDP during the last decade.

The expenditure on health is lower than the expenditures on the primary education sector and the education sector. The expenditure on the health sector, which crossed the 6-percent mark just once, in FY2010, remained at around 5 percent for most years of the last decade before dipping to 4 percent in FY2019. Health expenditures have been around 1 percent of the GDP during the last decade.

Against these declining allocation trends, the government has proposed a 17 percent increase of education-sector allocation in FY 2020 compared to the revised allocation in the outgoing fiscal year (FY 2019). The total allocation for the education sector stands at Tk 61,118 crore. In terms of the total budget, the allocation is around 12 percent. The education allocation is 2.1 percent of GDP. The allocation for the health sector has been set at Tk 29,464 crore—which is 5.63 percent of the total budget, or only 1.02 percent of the GDP. When these allocations are compared to the trends of the last decade, it tends to suggest a continuation of the historical trend.

Now it may be imperative to ask: are these allocations adequate to reap the demographic dividend or attain the SDGs 3 and 4? A comparison of allocations in the developing countries may help answer the question. In a study for the General Economics Division of the Bangladesh Planning Commission, Khondker and Rahman (2016) compared the investment in education in Bangladesh with the average of developing countries. Using the available data of 2015, it has been found that the education expenditure gaps in Bangladesh at primary, secondary and tertiary levels are USD 373, USD 419 and USD 1,965 per student respectively, compared to the average education expenditure of developing countries. The total expenditure gaps in Bangladesh as a percent of GDP at primary, secondary and tertiary education are respectively 3.64, 2.92 and 2.08. Finally, the estimated investment gap in overall education as a percent of GDP is 8.65. It has been also observed that the gap between the average expenditure of developing countries and that of Bangladesh is widening across all types of education.

Furthermore, according to available WDI data of the World Bank, education expenditures in Malaysia, Thailand and Sri Lanka have been significantly higher than Bangladesh. For instance, education expenditures as a percent of GDP in Malaysia was 4.83 percent (2016); Thailand 4.12 percent (2013) and Sri Lanka 3.48 percent (2016). Similarly, the public expenditure per primary student has been lower in Bangladesh compared to these three countries. Per student primary education as percent of GDP per capita in Bangladesh is 9.31 (2016), whereas they are 1.4 percent for Sri Lanka (2016), Malaysia 16.4 percent (2016), and Thailand 23.3 percent (2016).

A 2017 GED report titled "SDG Need Assessment and Financing Strategy: Bangladesh Perspective" estimated that Bangladesh needs to increase its average total health spending to 5.25 percent of GDP to attain SDG 3. The country would also need to increase public spending on education from its current level to 4.00 percent of GDP to attain SDG 4. 

The above statistics envisaged that social-sector allocation is on the lower side in Bangladesh. The allocation in the FY 2020 budget is far from adequate. Bangladesh must allocate significantly more resources to the social sector to bridge the gap with the developing nations. However, among others, low revenue efforts in Bangladesh are a deterrent.

Moving forward, Bangladesh must improve its revenue efforts to 16-17 percent of GDP within the next two years—and to 20 percent of GDP within the next five years—from the current level of 11 percent of GDP. Eventually, 2-3 percent of additional revenue efforts must be allocated for the social sector. Also, there should be a greater focus on the quality of education and health services. In this context, Bangladesh must create institutions to produce trained, good teachers and health professionals.

Bazlul H Khondker, PhD, is a professor of economics at the University of Dhaka.

Follow The Daily Star Opinion on Facebook for the latest opinions, commentaries and analyses by experts and professionals.

To contribute your article or letter to The Daily Star Opinion, see our guidelines for submission.