Budget for the poor? But does it reach the poor?

Poverty reduction has always been a core development priority of Bangladesh. The current government, as well as its predecessors, has addressed the issue through short to long term development strategies (e.g. five year plans) and fiscal policies. The outcome is undeniable – poverty rate has come down to 31.5% in 2010 from 56.6% in 1991-92. It can thus be claimed that Bangladesh has been able to utilize its economic growth as a means for poverty reduction. Nevertheless, still 25% of its population is considered to be hardcore poor and unfortunately, due to a number of structural impediments, they are still kept outside of the mainstream economy. Despite of specific provisions and programmes targeted for them, the benefits often do not reach down to the lower deciles of the income groups. The national budget for the upcoming year has just been put on to the table. As the last budget of the current government, it is widely apprehended that it would have a straight line connection to the approaching election and would undertake a range of popular pro-people provisions. However, the success in this regard will depend on the fact that whether the target group is able to reap the benefits or not.

To judge how much pro-poor the budget is, one needs to consider the channels through which resources are directed towards the poorest community. Social safety net programmes (SSNPs) are amongst the most direct interventions, specifically designed to assist the disadvantaged group of people. In the budget for 2013-14 share of total allocations for SSNPs came down to 11.4% of the total budget which was 11.9% in 2012-13; however, allocation in nominal terms increased by 11.5%. A detailed scrutiny of the SSNPs reveals that overall coverage has also increased. Programmes in SSNPs designed specifically for the poorest group are continued. Nevertheless, mistargeting and leakage have always been the key problems for the SSNPs. Weak monitoring system at the ground levels and lack of coordination between different SSNPs  has historically undermined the effectiveness of these programmes.

A second channel for outreaching the poor is subsidy in the agriculture sector which has been cut down to Tk. 9000 crore. In the budget of 2012-13 it was Tk. 9500 crore which was later revised upward to Tk. 12000 crore. A slash in the subsidy for the agricultural sector may create further pressure on the poor community as it is linked with rice price at the domestic market. The government also provides indirect benefits to the poor through providing incentives to certain industries that can create employment opportunities for them. Once again, the key point is whether the poor can derive the benefit or not. As a matter of fact, in many cases benefit of subsidy cannot reach the poorest group while a group of middle-man reaps the opportunity. Same stands for the incentives for industries. Rather than transmitting the incentives towards the worker, it often widens the profits of the owner.

Finally, it all comes down to the fact that beside allocating resources for the poor, the budgetary framework also needs to be backed up by other factors such as good governance to make the best use of the resource.

Programmes under ADP or SSNP needs good governance practices for successful and effective implementation. Without such measures, in one hand, leakage of fund can waste valuable resources. On the other hand, uncontrolled disbursement of resources to gain popularity before the upcoming election beyond the capacity and without necessary management strategies may result in an unsustainable and temporary flow of money towards the poor people which could encourage inflation. Resources are precious for a country like Bangladesh. The best use of this resource is absolutely crucial for a pro-poor development which cannot be done without a broad-based inclusive growth.

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Ashiqun Nabi is a Junior Research Fellow at IID.