The enigma of poverty reduction

Hasnat Abdul Hye | Published: April 26, 2023 19:40:59

Even in the halcyon days for poverty reduction, beginning from the turn of the century up to Covid-19 outbreak, it was not free from a smidgen of controversy. The Bangladesh Bureau of Statistics (BBS), official spokesperson on the subject, found itself at loggerheads with analysts and economists regarding its findings on poverty reduction. While there was consensus on the downward trend of poverty, disagreements over the degree of reduction left a lingering doubt about the reliability of BBS’s findings on the subject. The question was not whether poverty reduction took place but by how many percentage points. The Covid-19 pandemic in 2020 put paid to those days of complacent began counting, turning the poverty situation upside down. The progressive footprints of poverty reduction were substituted by regressive ones in Bangladesh as in the rest of the world. The economic catastrophe of the pandemic years hit the soft underbelly of Bangladesh economy where poverty reduction was nestled. Not only were achievements of a decade wiped out, the task of reducing poverty became an uphill one as new poor emerged in the wake of the pandemic. Addressing the reversal in the vulnerable sector and then turning the corner would take years, it was averred in the development community.
Poverty reduction takes place alongside economic growth though not at the same rate. It works out, firstly, through creation of employment opportunities and secondly, through various targeted programs undertaken by governments of developing countries, facilitated by economic growth. Whether directly contributing to poverty reduction or indirectly, sustained economic growth acts as the spur as well as the means to address a tenacious problem like poverty. Because of this cause and effect relationship economic growth has to be taken seriously into account to find out if it is conducive for poverty reduction at a particular time.
By all accounts and as expected, Gross Domestic Product (GDP) growth declined precipitously during the pandemic years (2020- 2022), posting at a measly rate of 3.5 per cent, a shadow of the hefty rate of around 8.0 per cent that became almost a norm in the years before catastrophe struck. The economy slogged on, recovering lost grounds and the bounce back continued until facing the road block of supply chain disruptions and global inflation resulting from the Ukraine war. Bangladesh economy is still smarting under the impact of this double whammy. Multilateral development agencies have kept the fluid situation under their radar and issuing updates on the outlook of the economy in the near term. The International Monetary Fund (IMF) has kept its economic growth outlook for Bangladesh unchanged at 5.5 per cent in the current fiscal year, compared to its prediction in January. But the latest forecast is 0.5 percentage points lower than the prediction IMF made six months earlier. The global outlook report by the IMF released last week also forecast no change in Bangladesh’s GDP growth in fiscal 2024, which is predicted to be at 6.5 per cent. The World Bank has forecast a watered down GDP growth of 5.2 per cent for the current fiscal, 0.3 percentage point less than the IMF estimate. The third multilateral agency, the Asian Development Bank (ADB), has forecast an outlook similar to the World Bank’s. The government has also revised down the projected growth rate to 6.5 per cent for the current fiscal year which was initially set at 7.5 per cent at the time of the annual budget. Given the reality of an anaemic growth rate of GDP predicted by all the multilateral agencies, declaration of a dramatic breakthrough in poverty reduction should come as a surprise.
But that is what BBS has sprung on observers when it unveiled the Household Income and Expenditure Survey (HIES), 2022. According to the findings of BBS, based on the latest HIES, Bangladesh’s poverty rate has dramatically decreased. The current upper poverty rate in the country has fallen to 18.7 per cent in 2022 from 24.3 per cent in 2016. The lower poverty rate denoting extreme poverty, has also fallen to 5.6 per cent in 2022, from 12.9 per cent in the 2016 HIES survey.
In the absence of a robust growth of the GDP, the findings about the dramatic decline of poverty rate, the extreme one included, appears to be too much of good news. To make it look plausible positive factors contributing to the improvement of the poverty situation have to be identified and relevant figures should be quoted. So far nothing by way of explanation has been offered by concerned authorities. In the absence of this, speculations are rife about the managed nature of interpreting the findings to serve political purposes. Taking a more benign view, analysts have wondered if the exaggerated estimate about poverty reduction is the result of a faulty questionnaire administered in HIES survey. Whatever may be the reason, the findings in HIES 2022 is highly exceptionable and cannot be accepted at their face value. With a weak recovery of economic growth and SME sector, the major employer of labour, languishing for lack of credit, the objective conditions for poverty reduction are simply not in place.
Having a realistic appraisal of poverty situation is desirable not only from academic perspective. For correct policy planning it is absolutely necessary to have a correct assessment of poverty situation. The adequacy of policy decisions on this will largely depend on whether accurate estimates of the present poverty profile have been made.
Given the questionable objectivity of BBS and lack of expertise it is high time to think about the need for a joint study and survey with another organisation like Bangladesh Institute of Development Studies (BIDS). This should be a semi-permanent set up tasked with the study to produce annual updates on the poverty situation and outlook. The multilateral agencies can be expected to come forward with necessary assistance and guidelines.
Poverty reduction is serious business requiring patience, skills and painstaking efforts, both from policy makers and the poor. These cannot be substituted by mere wish fulfilment, however pious these may be.
hasnat.hye5@gmail.com