Next budget should stress social safety, health

The national budget for the fiscal year 2020-21 (FY21) should give special focus on social safety net programmes (SSNPs) and related activities in view of Covid-19. It is true that budgetary allocations for SSNPs have grown in absolute terms as well as a share of Gross Domestic Product (GDP) over the years; however, majority of the vulnerable groups are still not adequately protected under the programmes. According to the ILO world social protection report 2017-19, about 66.0 per cent of the elderly population, 70.6 per cent of children, 79.1 per cent of women with newborns and 81.5 per cent of people with disabilities in Bangladesh were not covered under any social protection benefit. The Covid-19 pandemic is likely to worsen the situation of the above-mentioned vulnerable groups, reinforcing the need for additional public investment in the SSNPs. In this connection, government's strategy to expand SSNPs as one of the four strategic priorities for the next three fiscal years needs to be proactively pursued.

In view of Covid-19, the the government has taken a number of steps within its existing SSNP framework which includes relief (both in cash and in kind), assistance under the "ghorefera" programme, open market sales in selective areas and others. [To be specific: (a) Tk. 7.60 billion assistance for informal sector workers (Tk. 2,000 in cash to each of about 4.0 million families) in months of May and June. It was later extender to Tk. 12.0 billion (Tk. 2,400 in cash to each of about 5.0 million families). Also, the government plans to allocate Tk. 12.50 billion (maximum of Tk. 2,500 in cash per month to each family) in FY21 to continue supporting these vulnerable groups.]

The current approach to deal with Covid-19 by the government has a number of inadequacies, some of which are: (i) possibility of lack of reflection on the spatial dimensions of the demand for assistance/security (e.g. geographically backward regions) under the existing 'supply-driven' approach; (ii) leaving a significant share of urban and peri-urban vulnerable groups because of the primarily rural-focused approach of existing programmes; (iii) inadequate amount of assistance provided to the targeted beneficiaries;  (iv) lack of coverage of sections of the population who are deserving but gets excluded; and (v) problems  of 'inclusion' and 'exclusion' bias in selection (of beneficiaries) process. These challenges have been partly exposed in government's recently initiated cash-support programme for the 5.0 million marginalised households who are not covered under the SSNPs. According to the newspaper reports, the preliminary list of beneficiaries prepared for this programme have a number of weaknesses. These are as follows: multiple-inclusion of same person, inclusion of non-eligible people, exclusion of eligible people and inclusion of false names etc. However, this list has now been scrutinised by the concerned public agencies including the ministry of ICT, a2i programme and local level administration. In fact, such selection problems would be minimised if the lists were prepared by ensuring transparency through engaging local level social organisations particularly local level NGOs in identification and selection of beneficiaries. It is expected that the revised list of beneficiaries will be prepared soon.

These deficits and gaps will need to be addressed in the redesigned SSNPs in view of the FY21 budget.

(A) SSNP budget excluding pension has been increased from 9.5 per cent of revised budget (RB) for FY19 to 9.80 per cent of budget in FY20 and from 1.70 per cent of GDP in RBFY19 to 1.80 per cent of GDP in BFY20. However, it is much lower than the FY20 target of 2.30 per cent of the GDP outlined in the 7FYP. The government should allocate at least 3.0 per cent of the GDP for SSNPs as outlined in the National Social Security Strategy (NSSS).

(B) CPD has proposed that a total of 17 million (One crore 70 lakh), under lower case scenario, and 19 million (one crore 90 lakh), under upper case scenario, low-income households should be provided with Tk. 8,000 per month for two months. This is close to the lower poverty line, for a family of 4 members in today's current prices.  These will cover a total of 68.40 million and 75.70 million citizens respectively. Total financial requirement for the proposed cash transfer programme is estimated to be Tk 269.62 billion (about 0.9 per cent of GDP) under the lower case scenario and Tk 298.52 billion (about 1.0 per cent of GDP) under the higher case scenario. It is also estimated that these cash transfers will generate Tk 1685.14 billion and Tk. 1865.73 billion worth of demand for goods and services in the economy respectively. The proposed programme will also not be a replacement of the ongoing general SSNPs but will be a time-bound additional support measure in view of adverse pandemic impacts.

(C) The government is preparing a list of beneficiaries to be covered under the support programme for 5.0 million households.  This listing should put emphasis on urban and peri-urban vulnerable groups along with those of rural ones. It is important to ensure that transparency is maintained in implementation and that preparation of lists and distribution of cash and kind support is free from political influence. The government should take support of NGOs and local level social organisations in identifying, selecting and distributing the support, and to address 'inclusion' and 'exclusion' bias in selection process.

(D) Since it is the final year of the NSSS and the government lags far behind (both in terms of allocation and coverage) as regards implementation of the targeted life-cycle based programmes, it should take this opportunity to revisit the strategy and make necessary revisions.

(E) The government, following its earlier commitment, should consider introducing the Universal Pension Scheme (UPS) with the help of a limited scale pilot project. It would also allow the government to redesign the non-contributory old age allowance programme and provide beneficiaries the much-needed support to cope with COVID-19-induced health and economic vulnerabilities, in the immediate and also in the recovery phases. CPD estimate suggests that the government would require an allocation equivalent to 0.19 per cent to 0.85 per cent of the GDP based on different scenarios. CPD estimate suggests that the government would require an allocation equivalent to 0.19 per cent of GDP based on Tk. 579 per month (inflation adjusted current old age allowance), 0.70 per cent of GDP based on Tk. 2,145 per month (inflation adjustment national lower poverty line) and 0.85 per cent of GDP based on Tk. 2,621 per month (inflation adjustment national upper poverty line) to cover all its elderly citizens (65+) excluding government employees to introduce a non-contributory pension scheme in FY21. Thus the budget for FY21 will be a good opportunity to start the initial work in view of the government's commitment.

HEALTH SECTOR: The health sector should get priority in the national budget for FY21 for obvious reasons. The scale of the pandemic has proved that there is no way to contain the spread of COVID-19 without the necessary investment in the health sector. Unfortunately, the health sector in Bangladesh has always been neglected. Apart from the lack of infrastructure and equipment, healthcare facilities in Bangladesh are also not staffed with adequate numbers of healthcare service-providers. As of 2018, there was only one registered physician for every 1,581 individuals in the country. Among the healthcare facilities in Bangladesh, 28.0 per cent had access to specialists, 59.1 per cent had access to general practitioners and 79.7 per cent had access to nurses, as of 2017 (NIPORT, ACPR and ICF, 2018).

The level of awareness about healthcare among the general population was also found to be very low in Bangladesh. The health sector of Bangladesh has been plagued by many longstanding problems, such as low budget allocation for health, high out-of-pocket healthcare expenditure and poor utilisation of health budget. The allocation for health as share of total budget has also fallen (from 5.1 per cent in budget of FY2019 to 4.9 per cent in the budget of FY2020). Total allocation of the budget for health sector in FY20 was TK 257.33 billion, which was a rise by 15.2 per cent over the revised budget of FY19. Since 2017, the share of health budget as percentage of GDP has remained stagnant at about 0.9 per cent. According to the World Bank data for 2017, out-of-pocket expenditure on healthcare in Bangladesh was the second highest in South Asia after Afghanistan.

Since the outbreak of Covid-19, the government has undertaken a number of budgetary measures targeting the health sector, health professionals and health-care service providers. A total of Tk 2.50 billion has been allocated to the ministry of health to procure coronavirus test kits, equipment and personal protective equipment. The government has announced an incentive package for health professionals for their active engagement in dealing with corona patients. Apart from this, the government has announced health insurance ranging from Tk 0.5 million to Tk 1.0 million for the physicians and others dealing with corona patients and related facilities. The government has recruited 2000 doctors and 6000 nurses on an emergency basis to deal with corona patients. However, investment in the health sector ought to balance the expenditure for short-term emergencies for coronavirus and the long term needs of the health sector. Thus, the additional allocation for the health sector in FY2021 should not be a 'one-time' one, rather should continue in the coming years in order to address the longstanding demands of the health sector. 

The government should take into consideration the above discussed issues related to the health sector in preparing the budget for FY21.

(A) Enhanced budgetary allocation for the health sector, particularly for: (i) production and distribution of medicine; (ii) improvement of health services; (iii) availability of medical instruments and support to health professionals. In this connection, annual allocation for a number of specific projects in the ADP need to be increased. These relate to allocation for projects on communicable disease control (CDC), non-communicable disease control, community-based health care system development and nursing and midwifery education facilities.

(B) Necessary fund should be allocated for establishment of emergency facilities and procurement of health-related equipment and facilities. In this context, terms and conditions for procurement of emergency health related equipment may be made flexible and may be exempted from the taxes.

(C) The Ministry of Finance may consider a reduced rate of corporate taxes against the earnings of certain categories of taxpayers during fourth quarter (April-June) of the FY20 and first quarter (July-September) of FY21.These could include pharmaceutical companies, hospitals, clinics, and other health facilities which are involved in the production of medicines and in prevention, diagnosis, control, attention, and treatment. Besides, it may also consider introduction of tax credits for amounts paid by businesses to sanitize work premises.

(D) Doctors, nurses, and other support staffs working in private hospitals/clinics with corona patients and related matters may be incentivised through offer of special financial package through reduced rate of taxes on their income (in private entities) for first half of FY21. Hospitals, clinics, diagnostics, and laboratories involved in corona-related treatment and research should get a waiver as regards advance income taxes for the period of first quarter of FY21. As may be recalled, the the government has already given some incentives to public sector health workers.

(E) Grants or donations in cash for the prevention, diagnosis, control, attention, and treatment of the COVID-19 in favour of authorized public and private hospitals and clinics, should not be considered taxable for FY21.

Dr Fahmida Khatun, Executive Director, Centre for Policy Dialogue (CPD);

Professor Mustafizur Rahman, Distinguished Fellow, CPD;

Dr Khondaker Golam Moazzem, Research Director, CPD; and

Mr Towfiqul Islam Khan, Senior Research Fellow, CPD.

[email protected]; www.cpd.org.bd

[The article is based on CPD IRBD 2020. Research support was received from Md. Zafar Sadique, Mostafa Amir Sabbih, Muntaseer Kamal, Md. Al-Hasan, Abu Saleh Md. Shamim,Nawshin Nawar and Tamim Ahmed]