What about the new poor?

The lives and livelihood of the poor as well as the middle-income groups has been threatened by the coronavirus pandemic. Thousands of people have become unemployed. Many have had salary cuts. Some studies suggest that the pandemic has dragged around 25 million (2.5 crore) more people below the poverty line.

Despite this economic condition, the upcoming national budget has no special allocation for the pandemic-hit poor. The government is only increasing the number of social safety net beneficiaries, leaving the new poor outside of the loop.

Generally speaking, people below poverty line are included in the social safety net. At present, there are 123 such social safety net programmes being implemented in Bangladesh. The upcoming budget would facilitate continuation of these programmess with an allocation of Tk1.03 trillion (Tk 103,000 crore). The allocation would see an increase of Tk80 billion (Tk 8,000 crore) from that of the current 2020-21 budget.

In the last one year, urban areas saw more of an increase in poor people compared to the rural areas. For example, in super shops, ready-made garments factories, kindergarten schools and other establishments have either lost their jobs or had salary cuts.

A significant amount of people who were just a notch above the poverty line before the pandemic have lost their jobs or their wages have been slashed, and so they have dropped below the poverty line.

6 crore poor

According to Bangladesh Bureau of Statistics, the poverty rate of Bangladesh was less than 20 per cent during the end of 2019 or the pre-pandemic period. That time, around 35 million (3.5 crore) people lived below the poverty line.

Several studies conducted by government and non-government organisations recently pointed to the pandemic-hit new poor in the country.

A survey report, jointly prepared by Power and Participation Research Centre (PPRC) and Brac Institute of Governance and Development (BIGD), revealed in April this year that the pandemic made 24 million (2.45 crore) new poor in the country. Now the new poor have enlarged the total size of poverty-ridden population to around 60 million (six crore). However, the new poor people would not be considered for the social safety net.

The Covid-19 pandemic hits the poor and low-income people hard.
Ashraful Alam

Finance division sources said the upcoming budget would only allocate allowances for senior citizens, widows and deserted women, or additional 1.2 million (12 lakh) beneficiaries under the social safety net.

The government will allocate Tk35 billion (3,500 crore) as the old age allowance and Tk12 billion (1,200 crore) as the allowances for the widowed, deserted and destitute women in the budget proposal. It has been announced earlier that the 200 thousand (two lakh) freedom fighters (FF) will receive Tk20,000 as honorarium instead of Tk12,000 from the next fiscal. For this, the government will add more than Tk20 billion (2,000 crore) to the allocation for the FF honorarium.

On this context, Policy Research Institute’s executive director Ahsan H Mansur told Prothom Alo that the existing social safety net policy cannot identify the pandemic-hit poor. “There is no mechanism to identify the new unemployed people. Hence, the affected people will not be aided. Many low-and-middle-income people have drifted down below the poverty line because of the sudden shock. They cannot beg. The government now should create a scope to channel financial support to these affected people,” Ahsan H Mansur said.

10 programmes consume two-third of the allocations

Some analyses find that 10 among the social safety net programmes consume two-thirds of the sector-based allocations. The programmes are pension for retired government employees and their families, honorarium for freedom fighters, old age allowance, vulnerable group feeding (VGF), vulnerable group development, open market sales, primary school stipend and the one-house-one-farm programmes. These programmes are not directly related to the pandemic-hit new poor. Besides, urban areas witnessed more poor than the rural ones.

According to the analyses, urban poor are more vulnerable than their rural counterparts because there is limited social safety net coverage for the urban poor.

What the budget proposal will offer?

The government wants to revive the pandemic-hit economy by boosting business. That’s why the upcoming budget will facilitate tax waivers for the business communities to help them make-up their loss. The National Board of Revenues (NBR) sources said that the rate of corporate tax upon the companies, whether they are listed in the share market or not, will be reduced by 2.5 per cent. The minimum tax (regardless of profit or loss) upon the companies with more than Tk30 million (three crore) annual turnover will be reduced to 0.25 per cent from the existing 0.50 per cent.

To increase money flow to the production-based companies, the government will charge 3 per cent advance VAT at the import level. These tax exemptions will be given to reduce the tax burden upon the business communities so that they can create new employment and invest more in business while surviving the impact of the coronavirus.

The proposed budget for the upcoming 2021-22 fiscal will boost business for new employment of the poor instead of aiding the marginalised people financially.

*This report appeared on the online and print editions of Prothom Alo, has been rewritten in English by Sadiqur Rahman.