We need strategic support for mesoeconomics in the upcoming budget. Most of the new poor have gone to non-farm sectors for livelihoods. They do not want to downgrade themselves to lower-skilled work. They want to continue at the same skill level that they have, which is expected.
The innovation required in this area of mesoeconomics is in the delivery method. Last year, disbursement in SME and agriculture was low. We have microfinance institutions that can be used as delivery vehicles. We have used them to some extent but why not more? They gave some money but it was not enough.
Extending support to mesoeconomics is both a short-term response and also a measure to prevent Bangladesh's slide towards deskilling. Of those who lost jobs between March and June last year, 41% changed their professions. They were forced to take on unskilled, lower-skilled jobs, especially in the service sector.
This has a long-term implication for the economy. Upskilling is the key factor as Bangladesh dreams of becoming a middle-income country, but we see a trend of downskilling. These 41% people were subjected to deskilling. This gives a grim warning.
The key findings of the surveys done by different organisations on the Covid-19 impacts on families in cities and villages are similar. After the pandemic had stricken, every country tried to revive its economy. After a year, we wanted to assess both the nature of the shock and the extent of recovery.
We got some big revelations. One was that poverty has deteriorated, which is obvious and came out in every survey – the dimensions may have been different, though, due to the difference in sample size in each survey.
Some aspects of this deterioration need to be understood. Poverty in terms of not being able to eat was comparatively almost absent, but maybe it is resurfacing. According to our latest survey, 2% of the people are in extreme food insecurity. This is a trend among the poor.
There is a divide in the recovery effort in terms of profession. More or less, there may have been some recovery in some professions while there has been none in several.
There is less income recovery than that of activities. We saw at the end of one year that the overall average income is 7% less than that in the pre-coronavirus period. In urban areas alone, this is 14% lower among the poor. Urban poverty is a bit deeper subject.
But it should be noted that the income erosion of those who were engaged in agriculture is a little less. Instead, their income is up by 1%.
Then there are the new poor. They were above the poverty line but were in a vulnerable zone. A large segment of those staying between the poverty line and median income fell below the poverty line at the beginning, though a portion of them were able to come out of that later. Even after a year, about 2.5 crore new poor is a new reality.
There has been a decline in some indicators among the poor and another major crisis is urban poverty. We see a particular dimension of recovery. A recovery figure is being translated into the macroeconomy. At the micro level, about 8% who had jobs before Covid-19 are still unemployed after a year.
Due to Covid, 9.8% of people left cities. About 22% moved to villages during last year's lockdown. A segment of them started coming back after April. At the end of one year, we saw that 10% have left cities.
Apart from unemployment and lack of income, expense burden is a big issue among the drivers of deeper poverty. Housing, utilities, transport, health, and education expenditures have almost doubled in urban areas. To cope with the situation, a large part of the savings at the household level was used up. The amount of people's debt against their annual income has doubled than that in the pre-coronavirus period.
Analysing how families coped with the overall situation, we see that they relied on themselves and close relatives while there was some social support, especially institutional support, programmes of the government. But social security programmes remain as just tokens.
There is room to discuss whether reverse migration took people to villages or small towns. Whether they tried to work in agriculture or non-farm sectors is also a matter of discussion.
It is true that none of the major crops was affected during the pandemic. No big gap was created between the agricultural supply chain and consumption. A kind of dynamism in agriculture has been maintained.
I think time has come for a change in the roles played by the media and researchers in the sense that there should be a big change in the type of expectations. We should get rid of the trend to discuss the size of the budget during budget discussions.
The budget has highlighted problems that existed even before the pandemic. For example, low spending power did not emerge as a problem during the pandemic. It was there before the virus broke out and dramatically increased after the pandemic hit.
I noticed that we become the recipients of the official budget narrative. But in this budget, our expectations should focus on the main budget commentary. From our side, the most important demand is the change in tone itself. We did research on social protection last year and saw that there was no addition to the social protection budget; there was only repurposing.
Last year, the government viewed Covid-19 as a short-term problem. I am not sure to what extent this has changed in 2021 as the second wave began. Our situation is not as bad as that in India but I am absolutely fearful.
As I said, we want a change in the tone of the upcoming budget. The budget has two parts – literature and finance, though there is often no relation between them. The literature part in the upcoming budget is the most important one we need to look at. What is the tone of the government? Is the government seeing Covid-19 as a short-term crisis? Does it accept that a new crisis in poverty has emerged?
Then we need to elevate expenditure efficiency from a mere practical problem of implementation to a strategic challenge. We always comment that the budget is big but it comes with implementation challenges. But implementation itself has to become a strategic challenge. It is not a problem of bureaucracy. Bureaucracy is just an element of it.
I favour direct fiscal support. Last year, we were very conservative in terms of social expenditure. As I said, it was repurposing as a whole. Listing beneficiaries is important, but if the authorities directly distribute aid in slums or low-income settlements where the urban poor live, the database can be created simultaneously.
As for the amount of social assistance, if you aggregate it for the whole sample, it becomes very small. It was said that support would be provided to 35 lakh people this year. They are the same people who were on the list last year. But the number of new poor is 2.5 crore. So, there should be a scaling here. In this regard, we need to take some courageous fiscal measures.
We already have social protection programmes and the authorities need to scale them up. Last year, the government did some innovations, but the scaling was exceedingly limited.
The government needs to trust the people and society. Bangladesh has no shortage of capability. It lacks the intention to use the capability. We need to overcome that.
Hossain Zillur Rahman is the executive chairman of the Power and Participation Research Centre