Cash aid to the poor to cut poverty rate

In order to bring down the poverty rate to 10 per cent in the country, government's Economic Relations Division (ERD) has recommended providing Tk 5,000 cash aid to poor households per month. The financial assistance will be provided for 3 to 6 months a year until 2026. In this way, the number of poor people is expected to drop to 1.74 crore by 2026. By this time the country will move out of the least developed country (LDC) status. Even though the rate of poverty is not considered as a criterion for graduating from the LDC category, we expect that our poverty rate will be significantly reduced in the graduation year.

However, to materialize the ERD recommendation, the government needs to spend around Tk 7,700 crore if the assistance is given for three months a year and around Tk 15,300 crore if the assistance is given for six months a year. According to the recommendation, cash assistance will be provided to 11.50 lakh poor households in the first year; and gradually the number will be reduced in the following years.

Beyond doubt, the amount allocated for social protection schemes has increased in recent years. In the current fiscal year, Tk107, 614 crore has been allocated for the social safety net.
The point, however, more than half of the allocated funds do not directly benefit the poor by reducing poverty. Prior to the C-19 pandemic the poverty rate was 20.5 per cent in the country, which has risen to 23 per cent because of Covid-induced job losses. Statistics shows that 45 lakh out of 3.79 crore poor are 'new poor' in the country. But other sources have claimed that the number of pandemic-induced job losses is 2-2.5 crore.

There is a clear need for cash transfer programmes to temporarily support informal sector workers who have lost their jobs, since they make up the majority of the workforce. These people face a double-edged sword, in the sense that they are not recognised by social protection agencies, nor do they enjoy the protection offered by employment in the formal sector.

Unfortunately, the allocations for social empowerment and enhancing skills and capacities have been reduced by 50 per cent during the pandemic. The government has to adopt prompt initiatives to enhance skills and capacity building for the poor along with transfer of assets and disbursement of credit.

Direct assistance of a reasonable amount for a reasonable period to the poor working class will be very important for the economy to recover and get back to its pre-pandemic growth path. Giving cash aid to these families will bring in benefits only if they are vaccinated and employment opportunity is generated.