Social safety budget to stay same despite inflation rise

There is no good news in the upcoming budget for the ultra-poor who are now reeling under soaring commodity prices because their social safety allowances will remain unchanged for the seventh consecutive fiscal year.

Social protection beneficiaries, such as elderly citizens, widows, destitute tea workers, and hijra and bede (gypsy) community people, will have no way but to skimp on their spending for daily essentials.

The last time the government raised their allowances by Tk100 to Tk500 was in FY17. Since then, prices of daily commodities have been going up with each passing year but not their allowances.

A beneficiary will have only Tk2 left if they buy a litre of soybean oil and 30 pieces of eggs a month. A dozen eggs now cost Tk120 and soybean oil Tk198 per litre.

As per the annual inflation estimated by the government, the amount of goods that could be bought with this amount seven years ago now costs Tk691.

Infographic: TBS

The National Social Security Strategy, which came into effect in 2015, recommended increasing per capita social protection allocation every year in keeping with inflation. It also suggested raising the number of beneficiaries.

Allocation to rise but will be spent mostly on salaries etc.

The allocation for social safety net in FY23 will see a Tk5,386 crore rise from what was earmarked for the current fiscal year. But a major portion of it will be spent on pensions of retired government employees and paying salaries and allowances to those involved in implementing social safety net programmes.

In the next budget, Tk1,13,000 crore is being kept aside for social safety net, while the amount was Tk1,07,614 crore for the current fiscal year. The sector sees only a 5% uptick in its budget allocation though point-to-point inflation rose to 6.22% in March according to the Bangladesh Bureau of Statistics.

The FY23 allocation for pension payout amounts to Tk27,800 crore, which is Tk1,110 crore higher than in this fiscal year.

The social safety allocation is going to increase in terms of money in the new fiscal year but it will decrease in proportion to the government's total expenditure.

In the current fiscal year, the allocation was 17.82% of the budget, but it will drop to 16.7% in the next fiscal year. The current allocation was 3.11% of GDP, which will decline to 2.70% for the new fiscal year.

Finance disagrees to raise allowances

A meeting chaired by Finance Minister AH Mustafa Kamal in April proposed raising allowances for elderly citizens and widows by at least Tk100, but the finance ministry did not agree to it. In the new financial year, however, a decision has been made to bring poor elderly people of another 100 upazilas under the social safety scheme. In this way, 11 lakh new beneficiaries will get allowances, which will cost the government an additional Tk550 crore.

Economists fear that the effects of the Ukraine-Russia war can further stoke inflation in the coming months, with prices of most essential commodities rising in international markets and taka being devalued against dollars amid the foreign exchange market crisis.

Allocations for various other programmes, such as OMS, VGD, VGF, Food for Work, and employment generation, under the disaster management and relief ministry are not going to see any rise despite rising food prices.

On the other hand, as per the national pay scale 2015, salaries of government employees are increasing at 5% per annum.

There is a huge allocation for social security programmes, but a large part of it is spent on pensions of government employees and interest payments of savings certificates.

Besides, the Finance Division, under the social security net, includes interest subsidies provided to small and medium enterprises to fight Covid impacts, agricultural subsidies, grants to families of officers and employees who died in government services, rations of martyred freedom fighters and crippled freedom fighters, housing projects, and construction of flood shelters as well.

In the budget layout, the government announces providing allowances to millions of people under the social safety net, and a large part of them are elderly citizens, widows and others, but government spending for them is not adequate.

About 57 lakh people have been given old-age allowances amounting to Tk3,444 crore this year. In the new fiscal year, 68 lakh elderly people will get allowances of around Tk4,000 crore. Besides, 24.75 lakh widows and deserted women are receiving allowances of Tk1,495 crore this year.

Poor from another 100 upazilas to come under social safety net

At present, elderly people, widows and deserted women in 262 upazilas are getting allowances. Such people in 100 more upazilas are going to be brought under the social safety net in the next fiscal year.

The allowance of 20 lakh poor persons with disabilities has not been increased for four years. They have been getting Tk750 a month since FY20. The Tk800 maternity and lactating mothers' allowance per month has remained unchanged for five years.

Officials at the women and children affairs ministry said the number of beneficiaries of maternity and lactating mother allowance is not increasing in the new fiscal year, so the allocation may remain unchanged. In the current fiscal year, there is an allocation of Tk1,041 crore for 7.7 lakh maternity allowance and 2.75 lakh lactating mother allowance.

The food for work programme has a major role to play in the development and protection of rural infrastructure, alongside ensuring food security for the poor and the unemployed.

Under this programme, Tk336.71 crore has been allocated for the purchase of wheat in the current financial year, which will remain unchanged next year.

Wheat prices have risen more than 50% because of the Russia-Ukraine war and the subsequent ban on its exports by India. The government will now have to buy much less wheat next year as the allocation remains unchanged.

It is necessary to allocate Tk465 crore in the budget of the next financial year to buy the same amount of wheat. But the disaster management and relief ministry has not sought additional Tk126 crore in the budget proposal for the new fiscal year.

The ministry has sent a proposal of Tk10,865 crore to the finance ministry to implement the budget for the next financial year, which is only 9.19% more than that of the current fiscal year. Most of the additional allocation of more than Tk914 crore will go into payments of salaries and allowances, allocation for projects that have not been approved yet and implementation of the ongoing ones for Rohingyas.

A review of the finance ministry documents shows that under the disaster management and relief ministry, 1.25 lakh tonnes of food grains are procured every year for general relief and 2.1 lakh tonnes for Vulnerable Group Feeding programme. Every year, the ministry carries out relief activities for 65-70 lakh poor beneficiaries in disaster-affected areas through different programmes.

Besides, 25 lakh poor people are assisted through the VGF programme as an immediate help in dealing with the impact of any disasters. In all, about 95 lakh people are receiving social safety assistance every year through the disaster management and relief ministry.

Allocation for generating employment for the extremely poor is also not increasing. This year's allocation of Tk1,650 crore in this sector will remain unchanged next year. Special grants amounting to Tk20 crore will be the same as well.

What experts say

Dr Selim Raihan, executive director at South Asian Network on Economic Modeling, told TBS that if rising commodity prices are taken into account, the actual value of safety allowances has decreased a lot, but the government has not adjusted it in line with inflation. Such a meagre amount is of no use to the beneficiaries.

Therefore, the amount of allowance per capita must be determined considering the present condition of the commodity market, he said.

The government should take steps to ensure that the various allowances of the social safety net will automatically adjust to inflation every year, he noted.

Zahid Hussain, former lead economist at the World Bank's Dhaka office, said the overall economy is on the way to recovery, given GDP growth and per capita income, but the poor are yet to see their income return to pre-Covid levels.

The marginalised population, which is lagging behind owing to rising poverty rates, now needs additional assistance. In this situation, not increasing social safety allowances is a disappointment for them.

If the allocation does not go up despite the increase in commodity prices, per capita food distribution will have to be reduced in the future. Or, the disaster management and relief ministry can still implement the budget by reducing the number of beneficiaries, he pointed out.

But the country is not in a position to do either of these, he added.

At a programme on Monday, Debapriya Bhattacharya, distinguished fellow at the Centre for Policy Dialogue, said considering the current market situation, an allowance of Tk500 per person is not enough to meet the needs of the poor.

Such allowances are not in line with per capita national income and are not respectable for the poor, he said.

From 1998-99 to 2002, the government paid an old-age allowance of Tk100 per capita, which was about 6% of the then per capita national income.

According to a study by the Citizen's Platform for SDGs, despite an increase in allocation over time, it has fallen to 3.5% of per capita income. The number of social safety beneficiaries has increased, but the issue of raising per capita allocation has been neglected.

Debapriya suggested raising the per capita allocation for each allowance under social security programmes to a minimum of Tk1,000.