Whether ‘booming economy’ has reduced the poverty level in Bangladesh?
Since after the birth, with a short period exception, Bangladesh had gone thru political turmoil until 1990 when Ershad Junta was forced-out by then civilian movements. Since then, except little turmoil in politics, Bangladesh has been advancing slowly but steadily its dual themes of liberation war: Economic growth and Poverty reduction, which was the driving force of the historical speech delivered by the Father of the Nation.
In this journey, the data statistics clearly shows that Bangladesh has been enjoying booming economy in recent years. In year 1990, the GDP rate was 5.6 percent, which reached to 8.2 percent in 2019. That raises question: Whether booming economy has reduced the poverty level in Bangladesh?
The question posed here has to do with the impacts of government's particular policies that deal with the problem of poverty level in Bangladesh. Underpinning the premises, in aim to answer the question posed, this effort advances as follows
Definition of poverty : A simple definition of poverty followed in Bangladesh during the 1980s was the level of food consumption that provides calories of energy below what was required. The World Bank has categorized poverty based on its poverty level. They are a) extreme poverty as living on less than US $1.90 per day and b) moderate poverty as less than $3.10 a day.
These definitions boil-down to say that poverty is an economic condition in which an individual is unable to have or manage a minimum standard of living being a human. In Bangladesh, rural area dominates the poverty trends than that in urban or city areas.
Government policies and actions for poverty reduction: Since after the birth, Bangladesh has been receiving aids from different world organizations and from few counties addressing the poverty issues. However, this co-operation, partnership and contributions were very much limited till 2000 because of nation's political hotspots in multi-faucets.
Thus "Unlocking the Potential" becomes the Bangladesh's Poverty Reduction Strategy (PRS), which went through 2005 - 2007. The RSP was further extended for another year to June 2008. The previous Five-year Plan was replaced by the PRS, which becomes the basic policy to allocate Annual Development Plan (ADP).
In this journey, in order to fulfill the vision, the RPS identifies four strategic blocks and four supporting strategies. The four blocks are: a) enhancing pro-poor growth b) boosting critical sectors for pro-poor economic growth c) designing effective safety net and d) ensuring human development. Also there are some traditional but less focused programs of poverty alleviation in the country. These are Food for Work program, Food for Education, Pension for Elderly People, Vulnerable Group Development, Housing for the Poor and Homeless and the program of providing insecticides and high yield variety of seeds to rural farmers. The government has undertaken development initiatives to expand the area of non-agricultural activities in order to create more employment opportunities. All these have to some extent increased the entitlement of the poor, their social and economic awareness and empowerment.
How has it been progressed over the years?-Underpinning the definition of poverty in Bangladesh, the Figure clearly shows that the national GDP rate increased steady and continuously since 1995 till 2019 while over these 24 years period, the national poverty level in Bangladesh decreased continuously. In 1995, the national poverty rate was 35.3 percent, which reached to 9.2 percent in 2019. Because of COVID 19 influences, the GDP rate declined and reached to 5.0 percent and poverty level reached to 29.5 percent in 2020, which is higher than that of year 2019. However, over the period of 1995 - 2019, the inflation rate in Bangladesh fluctuated in which in 1995 it was 10.12 percent, which reached to 2.48 percent in year 2000. It again increased and reached to 7.04 percent in year 2005. With continued fluctuations in inflation rate in Bangladesh, the inflation rate reached to 5.48 percent in year 2019.
Data statistics clearly shows that the past political turmoil had interrupted the GDP growth and undermined the efforts of poverty reduction since after the birth of the nation. The GDP growth rate was minus 5.5 while the poverty rate was 90 percent in 1971. The poverty level significantly reduced and reached to 35.5 percent in year 1980 while GDP rate was minus 4.1 percent. In the 1990s, millions of people faced the dehumanizing effects of acute material scarcity because of inconsistent distribution and under utilization of land, technological backwardness, disparity in income distribution and political upheaval. The data statistics on inflation rate clearly shows that despites increased inflation rates in 1990s the poverty rates declined corresponding to GDP growth rates continued increasing.
Despite these ups & downs situations in multi-faucets including political arena, in year 2000, the GDP rate reached to 5.3 percent and corresponding poverty rate was 34.5 percent. These improvements continued slowly but continuously despites democracy was attacked by then Junta's barbaric act, which lasted 2007 - 2008. Since the year 2009, the current administration has been dominating the political arena where the GDP growth continuously increased, which reached to 8.2 percent in 2019. On the same token, the poverty rate was steady but slowly reduced, which reached to 9.2 percent in 2019.
Programs that deal with poverty issues in Bangladesh have increased some extent the entitlement of the poor, their social and economic awareness and empowerment. It has contributed improving the poverty situation in the country over the years. The poverty reduction rate over the period of 1990 - 2019 was steady and continuous whereas GDP growth rates were steady and continuous over the period 2000 - 2019.
Since GDP growth rate is not a good measure of nation's wellbeing, the poverty issue in Bangladesh still remains a challenge and requires effective plans that must begin with emphasizing rural poverty issues under the pro-poor strategies. The historical phenomenon suggests that the relevancy of democracy and good governance are undeniable factors in reducing the poverty in Bangladesh. Thus, rather just economic growth of the nation, policies emphasizing pro-poor activities must be incorporated into policy-design for marginalizing poverty level in Bangladesh. Accordingly, the following approaches can be instrumental reaching the goals sooner than delaying.
i) Create jobs that pull up the poor into gainful employment by providing greater economic opportunity. In this scenario, the economic progression located near to the target group can be more productive than the current setup. For example, garment-industry's production sectors can be located in rural areas, which can be a win-win to parties involved. Thus employees even with minimum wages will be in good economic conditions.
ii) Create incentives that enable the poor accessing the facilities that are developed with the mission to pro-poor strategies.
iii) Infrastructure development should be faster connecting rural areas than emphasizing the city areas for development.
Akim M Rahman is an Assistant Professor of Economics, Canadian University of Bangladesh, and Saadi Islam is an alumnus of Dhaka University.