Poverty spending shrinks in new budget

Despite mounting economic pressures on low-income households, the government has slashed the allocation for poverty reduction in the proposed national budget for FY2025-26, raising concerns among economists and development experts about the direction of fiscal priorities.

The proposed budget earmarks Tk 4.48 trillion for poverty reduction, down from Tk 4.61 trillion in the original budget for the outgoing fiscal year.

As a share of the total budget, poverty-focused spending has decreased from 57.9 per cent to 56.77 per cent, according to a Finance Division summary titled "Poverty Reducing Expenditure."

In absolute terms, this marks a nominal cut of Tk 129.94 billion in poverty-related allocations within a single fiscal year. The decline in budget share amounts to 1.13 percentage point year-on-year.

A longer-term view shows an even more concerning trend. The revised budget for FY 2023-24 allocated Tk 4.33 trillion-60.66 per cent of the total outlay-for poverty reduction.

Over just two years, the share of poverty-related spending has dropped by 3.89 percentage points, signaling what many see as a waning policy emphasis on poverty alleviation.

Economists warn that this shift comes at a particularly vulnerable time. With persistently high inflation, weak investment, and a slow recovery in employment, lower-income groups are under increasing stress.

Yet the new budget appears to reduce, rather than strengthen, the fiscal support aimed at them.

"It is disappointing that the announced budget, unveiled amid high inflation and a slowdown in investment and employment, has reduced rather than increased support for the poor-falling short of the rising demand for expanded benefits to protect vulnerable populations," said Dr Mustafa K. Mujeri, former Director General of the Bangladesh Institute of Development Studies (BIDS).

He expressed concern that much of the allocation may not reach its intended beneficiaries due to inefficiencies in targeting and implementation.

He emphasised the need for greater direct support for the poor through social safety nets, such as cash transfers and subsidised food distribution.

The national budget for FY 2025-26, proposed by Finance Advisor Dr Salehuddin Ahmed on June 2, includes Tk 3.01 trillion in direct poverty reduction spending, or 38.10 per cent of the total budget, and Tk 1.47 trillion (18.66 per cent) in indirect spending with potential poverty alleviation impact.

This marks a decline from last year's original budget, where direct and indirect poverty reduction shares stood at 38.88 per cent and 19.02 per cent respectively.

According to the Finance Division, Tk 2.84 trillion-or 53.06 per cent of the Tk 5.35 trillion operating budget-is considered poverty-reducing expenditure. An additional Tk 1.63 trillion, or 66.46 per cent of the Tk 2.46 trillion development budget, is similarly classified.

Budget documents reveal that the Ministry of Food will receive the largest poverty-focused share of its allocation, 98.01 per cent, followed by the Bridges Division (94.04 per cent) and the Statistics and Informatics Division (90.44 per cent).

Other high-ranking ministries include the Ministry of Disaster Management and Relief (88.43 per cent), Ministry of Railways (87.66 per cent), and Ministry of Primary and Mass Education (87.22 per cent).

On the other end of the spectrum, several government institutions show negligible or no poverty-focused allocations. The President's Office and the Office of the Comptroller and Auditor General received zero per cent, while the National Parliament received just 0.25 per cent.

Other low-ranking agencies include the Supreme Court of Bangladesh, Economic Relations Division, and the Anti-Corruption Commission.

Dr Selim Raihan, Professor of Economics at Dhaka University and Executive Director of the South Asian Network on Economic Modeling (SANEM), was more critical of the classification itself.

"Who is this report being made to satisfy?" he asked, calling the poverty-reduction label "arbitrary and ad hoc."

He argued that only well-targeted social protection programmes can be considered direct poverty reduction, while broader development investments-though important-should not be lumped together without clear methodological justification.

Raihan also pointed out that economic growth in recent years has not translated into proportionate income growth, and poverty levels have not declined as expected.

He warned that unless poverty spending is restructured and better targeted, the budget risks failing the very people it claims to support.

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