Poverty: Shall it fall just as it rose?
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FRIDAY, MAY 20, 2022
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Poverty: Shall it fall just as it rose?

Economy

Inam Ahmed
24 January, 2021, 10:45 pm
Last modified: 25 January, 2021, 11:11 am

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Poverty: Shall it fall just as it rose?

The last time the upper poverty rate was 40% was in 2005 and it took fifteen years to bring it down to 20.5%. But now even though the rate is again 40, it will not take that long to tame it because the institutions and the programmes that worked to bring down the number of poor are already in place

Inam Ahmed
24 January, 2021, 10:45 pm
Last modified: 25 January, 2021, 11:11 am
The never-ending hardship: A teenage girl, wearing anklets, breaks brick in the Postagola area when she is supposed to be with playmates. She came to the capital from Netrokona with her family four years ago, driven by extreme poverty. These brick chips are mostly used for construction purposes and the workers get less than Tk200 per day for this hard labour. The photo was taken recently. Photo: Salahuddin Ahmed/TBS
The never-ending hardship: A teenage girl, wearing anklets, breaks brick in the Postagola area when she is supposed to be with playmates. She came to the capital from Netrokona with her family four years ago, driven by extreme poverty. These brick chips are mostly used for construction purposes and the workers get less than Tk200 per day for this hard labour. The photo was taken recently. Photo: Salahuddin Ahmed/TBS

While the further rise in poverty in the past two months of the pandemic, as the latest survey by the South Asian Network on Economic Modeling (Sanem) indicates, is worrisome, it also indicates that the misery is finally plateauing.

If a cross section of economic data is put together, the story that comes out is even more intriguing that also sheds light on the economic structure of the country.

When the whole country was locked down because of the spread of Covid-19, people were left without jobs and income. Consequently, the poverty rate curved up, quite drastically from 20.5% to 40.9% in August – in just about five months of the pandemic.

Even if we assume the rate was static at 20.5% at the beginning of the pandemic, this meant an astounding 20 points or a 100% rise in just five months. And now in the last two months (November and December) it rose very slightly – only 1.01%.

This clearly indicates that the government's stimulus programme and the restart of the economy have worked and the misery has come down definitely. But as they said even a 90% economy is not enough, people are still falling behind the poverty line as their income and jobs have not returned fully. As The Economist had written, "In many things 90% is just fine; in an economy it is miserable".

This also gives rise to the hope that the curve will fall as sharply as it rose.

The last time the upper poverty rate was 40% was in 2005 and it took fifteen years to bring it down to 20.5%. But now even though the rate is again 40, it will not take that long to tame it because the institutions and the programmes that worked to bring down the number of poor are already in place.

"Hopefully, the fall in poverty will be sharp in future," explained Sanem Executive Director Dr Selim Raihan, "but the current concern is the new set of poor who have emerged because of the pandemic. They are basically the self-employed small traders and entrepreneurs. We need new types of targeted programmes outside the conventional wisdom to make these new poor rise again."

Although the economy has opened, business firms still find slow revenue recovery and the labour market is also showing a lag response. The Centre for Policy Dialogue has reported that 3.6 lakh readymade garment jobs have not returned yet. Consequently, many were forced to take up new sources of earnings but have yet to see their incomes get to the pre-pandemic levels.

"Unless special innovative measures such as employment guarantee schemes are taken, recovery in 2021 will be slow. The new schemes have to be better targeted so that leakage does not stray away the benefits," Dr Raihan said.

Better SME stimulus programme is another urgent need now as figures show only 50% of the fund for small and micro enterprises has been disbursed against almost 90% disbursement for the big businesses. The RMG sector was the luckiest segment that has received Tk10,500cr for paying wages from the Tk35,000cr allocation meant for wages and working capital.

The other puzzle that has emerged from Sanem's survey is that although there has been a surge in overall remittance, households have reported lesser amounts received.

This shows how one can miss the trees for the forest.

While the higher remittance flow was a reason to rejoice, the actual amount received by families and individuals was lower, and it can be explained by analysing the remittance chain.

In remittance, it is not only the expatriate workers, the banks and the receivers that are involved. The exporters and importers play an equally important role.

"It is because of the exporters and importers that the informal channel thrives," explained Dr Raihan.

"Since international trade slumped because of the pandemic, informal remittance or Hundi slumped too and workers abroad had only the formal channel open to send their money. This is why formal remittance surged," said Dr Raihan.

But as informal remittance flow vanished, the net receipts of the households also dropped.

So on balance, those who depended on money coming from abroad saw their income drop, resulting in a sharp rise in poverty.

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