Most countries in the world have had to take different degrees of lockdown and social distancing measures to limit the spread of the coronavirus disease (COVID-19). Although critical in containing the Covid-19, these measures have also triggered an unprecedented economic crisis. The crisis has been hitting poor and middle-income groups most as they rely primarily on current wages, salaries, and income from small businesses. To mitigate the health and economic fallout of the Covid-19 pandemic many governments took unprecedented economic measures to help the poorer segment of their population affected by the job loss and income loss.
However, the vast majority of the people in developing countries do not get adequate protection as there are more people who need support. Most developed countries have a well-design social protection system, which plays an important role to provide support and target poor and vulnerable. Despite the challenges, many developing countries have also expanded their social protection system during this pandemic to provide income support due to job loss and concern about food insecurity. Needless to point out, these measures are also important, even during the normal economic times, for developing countries to achieve sustainable development goals (SDGs), promoting justice and social security for all. At times of such economic and health crisis, expanding the social protection system also helps to lift domestic demand, protect the jobs and the economy from further fallout.
The social protection system of a country consists of policies and programs designed to reduce poverty and vulnerability, which may include cash or in-kind transfer to the poor, providing basic services such as education, medical, housing for free or at subsidized rate etc. In a pandemic, this means protecting health and livelihood such as providing minimum income support or food security. Provision of easy and free testing for the (poor) people who have Covid-19-related symptoms should be the immediate attention of the social protection system.
Are we doing enough in Bangladesh, offering minimum social safety nets for those needed the most during this Covid19? Strengthening social protection systems is pressing to address emerging challenges. In Bangladesh, while we like talking about high economic growth, adequate foreign exchange reserve, sound macroeconomic stability and graduation from LDC, the Covid-19 pandemic also offered to test the strength of the economy and moral of our fundamental values and fabric of the society. More recently, we have seen the International Monetary Fund's (IMF) projection that Bangladesh is expected to surpass India in terms of nominal GDP per-capita this year. This projection has created a huge excitement in media and among the public. While the debate surrounding GDP continues, it also indicates that Bangladesh has made enormous progress in improving its per-capita GDP over the recent decades.
Providing social safety nets even for people below poverty line (about 20% of its population) in Bangladesh would require significantly more financial measures than the current level. In times of crisis like Covid-19, wider safety nets are necessary to support those 'near poor' and others (such as 'new poor'). Despite high economic growth, the tax revenue as a percentage of GDP has been experiencing a downward trend since 2012, from 11.25% in FY 2012-13 to 8.17% in FY 2019-20. Our tax-GDP ratio is one of the lowest in developing Asia (see Table 1). Such low level of revenue results in a low level of government expenditure in public works, health, education, and most importantly in social safety net programs. Overall, a low level of revenue may already have contributed to higher distributive inefficiency in the economy of Bangladesh.
According to the World Social Protection Report 2017-19 (page 401), Bangladesh allocated 1.2%, and 1.0% of GDP to its social protection programs in 2005 and 2016, respectively (Table 1). A recent UN report mentioned social protection expenditure in Bangladesh is only 0.7% of its GDP- the lowest in South Asia (with India 3.2%, Nepal 2.1% and Pakistan 1.9% of GDP). More importantly, much of its poorest people is outside of any social safety net programs, with 46% of extreme poor (income<$1.9 a day) is not covered at all. India, on the other hand, has made significant progress in targeting and identifying its poorest segments of the population with their various social assistance programs, with 96% of extreme poor (income<$1.9 a day) is covered. Experts often give the credit to India's Aadhaar card system for this universal coverage. Despite having a national identity card database, Bangladesh has not been able to develop a registry system to target social assistance to those eligible.
This lack of accurate citizen database, absence of an electronic system to monitor the progress in social assistance have created numerous problems during the current Covid-19 pandemic. In the early days of the pandemic, when the government tried for free food distribution, open market sales, extended cash transfers, we observed various incidents of misappropriations, mismanagement and poor targeting as reported in the media. Even if we keep those anomalies aside, the amount of distribution as of 2nd of November 2020 by the Bangladesh government is quite low compared to other comparable counties. Table 2 exhibits some key statistics of Covid-19 rescue packages and Covid-19 cases of various countries. Bangladesh government provided 3.97% of its GDP as various stimulus packages (lowest among the countries in the table) whereas India provided 14.83% of GDP in such packages. In per capita terms, Bangladesh provided US$74.86, in contrast to US$278.68 in India. Even Pakistan with their struggling economy provided a slightly higher level of assistance than Bangladesh.
Moreover, two-thirds of the Covid-19 stimulus distribution of Bangladesh is not aimed directly to the people's livelihood and were provided mainly to businesses through the banking system. Bangladesh government has provided US$25.25 per capita as cash or in-kind support directly to the poor people, as opposed to Indian and Pakistani governments by US$118 and US$34 per capita, respectively (see Table 3). It is not the case that Bangladesh is witnessing a better situation in Covid-19 pandemic. Bangladesh experienced more Covid-19 cases per million of population than Pakistan. Though the case number is lower than India, the percentage of tests that returned a positive result is much higher in Bangladesh, 17.15% of the total test. This rate is the second-highest in Asia, only behind Oman (a country with less than 5.0 million people). The significantly low-test number and high positive result indicate that actual Covid-19 cases may be well above the reported case if a similar level of tests as in India or Pakistan were performed.
It is worth to mention that before the pandemic Bangladesh also spent a significantly lower fraction of GDP per-capita to support its poorest than we observe in case of India or Nepal. In the last decade, despite high economic growth the government is failing to provide greater support or protection to the poorest strata. If we have such high economic growth, the government should able to distribute the benefits of growth to the people who need basic food, shelter, free test for Covid-19, in addition to the provision of their healthcare and education, etc. Unless we are able to do these, the 'growth story' of Bangladesh will remain a puzzle for many of us and achieving SDGs will be much harder task than we speak.
The Covid-19 crisis has highlighted the critical role of well-designed and competently implemented social protection systems to target and provide adequate support for poor and vulnerable communities. Bangladesh needs to invest immediately in building a social protection system and a social registry. Though we are passing a hard time, it would be a timely decision as the second wave of Covid-19 may be on its way. This Covid-19 crisis is perhaps Bangladesh's worst calamity since its independence, and it has exposed the cracks in our social safety nets and public health systems. New challenges lie ahead as the pandemic has completely shaken the existing economic and social fabric. Bangladesh's social protection system needs to evolve into a broader recovery program that not only builds back the same economy but to adapt to a permanently changed market.
Asad Islam is Director, Centre for Development Economics and Sustainability (CDES), and a Professor of Economics at Monash University, Australia, and Hashibul Hassan is a PhD student at Monash University.
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