Economy reopens, but poverty rises

Bangladesh had made a consistent progress in reducing the poverty rate until the pandemic pushed it back up to double the number of poor people and triple the number of extreme poor. 

Inequality has gone up too, according to the findings of a study done by South Asian Network on Economic Modeling (Sanem), a network of economists and policymakers. The research was done to analyze the impact of the pandemic on income, expenditure, employment, education, health and social safety net. 

A nationwide survey was conducted for the research through telephonic interviews of 5,600 households from 2 November 2020 to 17 December 2020.

About 42% of the population now live below the poverty line, according to the study report presented in a webinar yesterday [on Saturday]. The figure was 21.6% in 2018, according to a survey by Sanem and General Economics Division of the Planning Commission. 

The Bangladesh Bureau of Statistics (BBS) estimated the poverty rate at 24.3% in 2016.

The poverty rate doubled last year both in rural and urban areas to 45.3% and 35.4% respectively, said Sanem's Executive Director Selim Raihan. In 2018, 24.5% people living in villages and 16.3% in cities were poor. 

The rate of extreme poor increased to 33.2% in rural areas and 19% in urban areas. Overall, the extreme poverty rate went up to 28.5% from 9.4%.  

Rangpur, Rajshahi and Mymensingh are stricken by poverty the most. But Mymensingh has the highest number of poor people, replacing Rangpur that saw the largest share of the poor in 2016 as per the BBS data.  

Nearly half of the surveyed households cut off their expenditures on food and non-food items in 2020. But they spent far less on non-food items than on food, indicating that a larger chunk of their shrinking income was spent on food. 

However, overall consumptions of well-off people were higher than before. But expenditures on non-food items were reduced by all -- extreme poor, moderate poor, vulnerable poor and non-vulnerable people -- in 2020.

The research shows that 49% of those who were extreme poor in 2018 remained so in 2020. Moreover, 41% of those who were poor in 2018 came down to the level of the extreme poor last year. 

The consumption Gini coefficient, used to measure the severity of inequality, rose to 0.33 in 2020 from 0.31 two years back.  

Amid the raging pandemic, the wealthiest 5% earned more and consumed more while 20% at the bottom had less income and so made less expenditures. 

In 2018, the expenditure share of the top 5% was 12.9% that increased to nearly 14% last year. 

On the other hand, 20% of the lowest rung accounted for 9.6% of the total expenditures in 2018, which came down to 6.47% in 2020.   

The research also found out that children of only 21% of the households could attend online classes or learn from televised programmes.

About 15% children of the poor households participated in distance learning, as schools and colleges remained shut, while the figure was 26% for rich households. 

Selim Raihan said Covid-19 diminished employment in the services sector and as a result many after losing jobs joined the agricultural sector. 

But the employment in the industrial sector last year was as it was in 2018, he added.

The number of day-labourers declined slightly. The opportunities of self-employment were less in 2020 than in 2018 but employed people who get wages grew in number.   

From March through December 2020, 9.7% workers lost jobs countrywide. During the time, 48.72% households borrowed money to bear the expenditures. 

Only 5.32% people were benefited from the government's stimulus packages while about 26% people got the advantages of the social safety net.  

Though the country received more remittance amid Covid-19 than before, families of migrant workers said they had received less than before.  

Selim suggested that migrants used to send remittances through Hundi and banking channels. Since money stopped coming through Hundi, the cash flow through the banking channel jumped up. 

However, the total remittance must have been less than before, Selim added. 

The survey received five recommendations from the households surveyed – strengthening the Covid management, ensuring transparency in distributing funds of stimulus packages, keeping the prices of essentials low, reining in corruption and increasing jobs. 

Former lead economist of the World Bank's Dhaka office Zahid Hussain said poverty ran deep not only in terms of consumption but also in terms of access to education. 

Three-fourths of the students were deprived of online education amid the spread of infection. 

"Educational poverty is no less critical than consumption poverty," Zahid said.  

From the data of consumption expenditures in 2018 and 2020, it is seen that a majority of the households' expenditures were limited to Tk5,000, which seems to be a trap they struggle to come out of, Zahid said. 

Executive Director of the Centre for Policy Dialogue Fahmida Khatun said, "Our economy grew but employment did not. Covid has reduced income. We also see that a large part of the population is relying on borrowed money for consumption.

"We have to see where they are taking loans from. Are they taking loans from influential people or banks or any other organisations? They might get trapped in poverty due to loans from influential people."  

People are failing to overcome loss incurred by Covid-19 with government support, Fahmida said, adding that the government should have increased public expenditures.  

Inequality is rising. Corruption too. Things will not improve without reform and government initiatives, Fahmida said.   

The authority should check whether people are sending back the money that had been laundered to take the advantage of 2% cash incentives given for sending remittance through legal channels, she added. 

Prof M M Akash said it was important to overcome the loss of Covid-19 quickly. 

"We have to see how poor people pay off the loans. A majority of the people surveyed said government support was scanty. So, the government may come forward to address the problem."