The rate of extreme poverty in Bangladesh increased for the last three consecutive fiscal years (FYs) and is projected to reach 7.0 per cent in the current fiscal year (FY 2024-25), according to a latest World Bank report.
The rate stood at 6.1 per cent in FY 2023-24, rising from 5.0 per cent in FY 2021-22, says the WB's Macro Poverty Outlook, unveiled recently simultaneously with its flagship report titled "Bangladesh Development Update".
According to the outlook, extreme poverty in Bangladesh is projected to increase by 2 percentage points, which represents falling 3.57 million new people below the poverty line.
In FY 2021-22, the absolute number of extreme poor was 8.57 million, which was 5.0 per cent of the total population (171.3 million). The number would increase to 12.13 million or 7.0 per cent of the total population (173.31 million) in FY 2025.
The number of projected extreme poverty would then increase by 41.64 per cent in three consecutive FYs.
Experts and economists explained that the World Bank projects the poverty rate following a model using the rate of economic growth and elasticity of poverty with growth.
The rate of extreme poverty increased as the GDP growth reduced in the years following the Covid-19 pandemic, they added.
They also said the WB projection failed to consider the impact of inflation on the poverty rate. The actual poverty rate would be significantly higher than the WB's projection.
The World Bank estimates poverty rate following three income levels while people's average daily income is below 2.15 Purchasing Power Parity (PPP) dollars using the 2017 price level.
People with average daily income below $3.65 PPP dollars are identified as lower middle-income poor and average income below 6.85 PPP dollars are identified as upper middle-income poor.
However, the rate of lower middle-income poverty and upper middle-income poverty reduced moderately in recent years.
The World Bank identified lower economic growth, reducing wage and loss of jobs in industry and services sectors behind the increase in extreme poverty rate.
The report revealed that these sectors were especially affected, facing job losses of around 4.8 per cent and wage reductions, likely pushing their families into extreme poverty.
Consequently, extreme poverty is projected to increase by 0.7 percentage points or affect 1.2 million people in 2024.
The growth slowdown in the FY25 will exacerbate the situation for the most disadvantaged populations and increase disparities, warned the report. Extreme poverty is expected to rise to 7.0 per cent, pushing an additional 1.7 million people into extreme poverty.
The report also explained that about 6 out of 10 individuals are estimated to have used their savings to maintain household consumption.
Conversely, households benefiting from robust remittance inflows will improve their welfare, but the contrasting effect will widen inequality by 1.4 Gini points.
The report identified an increase of political instability, poor corporate governance, and the potential insolvency of some banks could worsen an already weak financial sector.
Persistently elevated inflation, weak global demand, energy shortages, and climate shocks could lower the growth outlook further and exacerbate vulnerability to falling into poverty, it concluded.
Dr Zahid Hussain, former lead economist at the Dhaka Office of the World Bank, said the WB made the projection subject to the real GDP growth, which is irrelevant to inflation.
But a huge number of people have fallen below the poverty line in recent years due to a reduction in real income following a huge inflation, he said, adding that the number of actual poor may increase further considering the impact of inflation.
He suggested the government take immediate measures to reduce inflation. The prices of certain essentials should be reduced immediately.
He also criticised the government decision to put on hold the disbursement of allowance of social safety net programmes on the ground of inclusion errors.
He also said that the government support in cash and kind may protect vulnerable people from dropping below the poverty line.
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