The country is still in the phase of recovery from the Covid-induced adverse implications that visited the economy over the past two years. In this connection, the national budget for fiscal year FY2022-23 (FY23) needs to accommodate measures to support the sustainable Covid recovery through Social Safety Net Programme (SSNP) and Stimulus Packages.
SOCIAL SAFETY NET PROGRAMME: Social protection-related activities have been undertaken in Bangladesh under various social safety net programmes following the 'life cycle approach' advocates in the National Social Safety Strategy(NSSS). Three key areas covered under social safety net programmes are - (a) Child and family social protection schemes; (b) Social protection for women and men of working age; and (c) Social protection for older women and men: pensions and non-health benefits. It is reckoned that the current structure and composition of the social safety net programmes are not adequate in view of government's policies and pledges in light of current and future needs of the country. First, Bangladesh is in the process of graduating from the Least Developed Country (LDC) group by 2026. Its social safety net programmes do not align with post-LDC developing countries. Second, Bangladesh aspires to become an upper-middle-income country (threshold income level of US$4096) by 2031 and a high-income country (US$12535) by 2041. In view of these, its current programme needs significant restructuring and upgrade to match those of upper-middle/high-income countries. Third, the rising number of ageing populations over the coming years which will gain momentum will necessitate refocusing of social protection on the needs of the old age population. Fourth, in view of ensuring the health and income security of workers, the issue of social insurance-related programmes ought to be given the highest priority. In this backdrop, the government's announcement of the introduction of a universal pension scheme (UPS) from the next fiscal would be a positive development.
At present social safety net related activities cover a total of 143 different programmes under nine categories. During FY22 total allocation for social safety net programmes was TK 1.07 trillion which was 17.8 per cent of total budget and 3.1 per cent of Gross Domestic Product (GDP). The allocation has been increasing over the years. Major share of SSNPs is allocated for various allowances (36.8 per cent in FY22) followed by cash transfers (18.8 per cent) and food security and employment creation (14.0 per cent). However, share of allocation for various categories has experienced changes over the years - it has reduced for various allowances, and for food security, credit support programmes while share has increased in case of cash transfers, various funds/programmes. It is to be noted that pension to government employees accounts for 67. 3 per cent of total allowances and 24.9 per cent of total SSNPs. If pension of public sector workers is excluded, the relevant shares will come down significantly.
Despite a large number of SSNPs, with significant coverage, these are yet to cover the total eligible population in all areas. As ILO report (2020-22) mentions, the highest proportion of population is covered under old age support (39 per cent of total old age people) followed by children (29.4 per cent), mothers with newborn (20.9 per cent) and persons with disabilities (18.3 per cent). The NSSS has proposed inclusion of new SSNPs and reforms in existing programmes in support of children. The Blooming Children Report of the GoB (MoF, 2018) had earlier proposed to increase the budget for children to 20 per cent of the total development budget. However, the allocation currently stands at 15 per cent (MoF, 2020). Workers are not included under the SSNPs and only a small share of workers with injury are covered under relevant programmes (12.5 per cent). Workers are the least protected under the country's social protection system. As a matter of fact, workers tend to be least protected globally (18.6 per cent) compared to other categories of people eligible for different social protection schemes.
National Social Security Strategy of Bangladesh 2015 made a number of pledges with regard to the social safety net for different categories of people. The pledges include strengthening the social security system for the urban poor, strengthening programme for working people (15-59), operational strengthening education and training, strengthening job creation programs, introducing unemployment, accident, sickness and maternity insurance under the national social insurance scheme, etc. As per the NSSS, the government has planned to provide an allowance of Tk 3000 per month to the elderly above 90 years which is yet to be implemented. The Ministry of Social Welfare was assigned to prepare a list of the beneficiaries which also has not yet been prepared.
The Ministry of Social Welfare provides allowances to 8.85 million disadvantaged people under the social security program. The actual number of disadvantaged people is much higher than this (as per NSSS 2015, 35.7 million of the poorest and most vulnerable people were targeted to be covered under SSNP), and the money given to them is significantly lower than the actual needs. It goes without saying that the amount of monthly allowance (Tk 500) for the elderly, and marginalised women are rather low considering the requirements. A total of 2.5 million women and 5.7 million elderly people are covered under this safety net programme in the rural areas in 162 Upazilla out of 495 Upazilla in Bangladesh where 33 per cent Upazilla are covered under this programme.
Compared to other cohorts, the social security coverage of the workers is very low. Only 12.5 per cent of the injured workers actually benefit from this allowance. There are a total of 68.2 million workers who should be included under the universal pension scheme. Working pregnant women, sick workers, injured workers, and unemployed workers should also be gradually brought under the coverage of SSNPs to help them tide over periods of deprivations and sickness.
The FY23 budget may take into consideration of the following recommendations:
• Bring the SSNP under a single window. Government should bring the 143 social safety net programmes under a single, consolidated and integrated umbrella in order to move from social safety network to social security. These programmes can be categorised under three areas - (a) Child and family social protection schemes; (b) Social protection for women and men of working age; and (c) Social protection for older women and men: pensions and non-health benefits.
• Raise the amount of allowance. Given the high-level food price inflation and rise in the living cost, the government should increase the amount of allowance, particularly for the elderly, widows and marginalised women. According to the newspaper report, government is going to increase the allowances by Tk 100 and the coverage by 1.15 million. It is proposed that government should raise the allocation to Tk 1000 and coverage by 2.0 million people. This should increase the coverage of widow, oppressed women, and physically handicapped people. The programme should cover eligible beneficiaries of all upazilla (currently covered 162 upazilla).
• Expand coverage of urban poor. Government needs to consider increasing the coverage of urban based destitute people. In the FT23 budget, the government should raise the allocation targeting slum dwellers, floating people, pregnant women, and similar marginalised groups.
• Digitalise the beneficiary list. Restructuring of the beneficiary list should be prioritised for effective implementation of SSNPs. Digitalisation of the database with national identification number or other national documents for proper targeting of the beneficiaries will reduce mis-targeting and corruption and complexities.
• Introduce and restructure various child protection programme. In view of the need to address the needs of the children, particularly in the backdrop of the Covid with its adverse impacts in terms of health, nutrition, education and overall welfare, a number of measures are prepared for FY23 budget. (a) universalise Mother and Child Benefit Programme (MCBP) for early childhood development. The programme will require a monthly allocation of Tk 800 for the 14.0 million children (0-4 years) where the GoB will need to allocate an additional amount of Tk. 95.0 billion by consolidating the existing six relevant programmes. The programme can be launched in the upcoming FY23 budget with an increased monthly allocation; (b) establish a separate child directorate for monitoring and implementing child-related programmes which will eventually play an important role in universalising the MCBP; (c) allocate resources to develop a comprehensive database on children with interoperability of the existing platforms maintained by relevant ministries and other entities; (d) introduce universal mid-day meal programme for primary school students based on the experience of the already mentioned pilot programmes.
• Introduce social protection for workers. Government should introduce social protection for workers in the following four areas: (a) maternity protection, and paternity and parental leave benefits; (b) sickness benefits; (c) employment injury protection; and (d) unemployment protection. Maternity protection includes income security (through cash benefits), leave policies and effective access to good-quality maternal healthcare for pregnant women and mothers of newborns. Employment and labour market interventions such as employment protection and non-discrimination, childcare solutions after woman's return to work and good occupational health and safety measures and breastfeeding facilities at the workplace are important to give adequate protection to pregnant women and new mothers. Sickness benefits aim at ensuring income security during sickness, quarantine, or sickness of a dependent relative. Employment injury protection includes providing support to workers through prevention, treatment and rehabilitation. Unemployment protection schemes provide income support for involuntarily unemployed and underemployed people and offer assistance for return to work, in line with international labour standards.
• Take initiative to implement UPS. Universal pension scheme (UPS) which has been announced recently and is to be introduced from the next fiscal year is a welcome initiative. It is expected that strong institutional and operational structure will be developed in order to properly manage such an important scheme.
STIMULUS PACKAGES: The government has declared 28 stimulus packages worth Tk 1919.19 billion, of which the Bangladesh Bank is overseeing 10 packages directly. By February, 2022 overall disbursement progress was about 70 per cent. However, disbursement among the low-income or marginalised businesses is lower than the average level - only 60 per cent. The packages for low income and marginalised people include salaries for employees of hotels/motels, interest-providing and credit guarantee schemes for CMSME loans. It is to be noted that disbursement during the first phase was faster compared to that in the second phase.
A number of stimulus packages has made hardly any progress. These include working capital loans for A, B and C types of industries (1.7-2.7 per cent), and credit guarantee schemes (3.2 per cent). Sluggish progress is observed in case of pre-shipment credit refinancing (11.3 per cent), low-interest working capital loans to micro, small and medium enterprises, including cottage industries (34.2 per cent), working capital loans for adversely affected large industry and service sector (33.4 per cent), agricultural refinance scheme (40.2 per cent). In contrast, considerable progress has been made in case of payment of salaries and allowances to the workers-staffs of the active export-oriented industries (98.7 per cent) and support under the Export Development Fund (EDF) (92.7 per cent). In other words, credit support for export-oriented and large-scale enterprises has experienced better progress, primarily because of their better credit-worthiness with banks. In contrast, the credit support for the CMSMEs and for the informal sector including the agriculture sector experienced sluggish progress perhaps because of their low level of credit worthiness to banks. Hence, credit-based stimulus packages were difficult to reach marginal groups and CMSMEs due to poor bank-client relationships.
Against the backdrop, the upcoming budget for FY23 may consider the following recommendations:
• Give priority to disbursing support under stimulus packages. It is found that new phase of the stimulus package for certain target economic activities has been introduced and loan disbursement has been continued although the earlier phase has not yet been fully implemented. The Bangladesh Bank should be asked to not allow new stimulus packages until the earlier packages are fully disbursed.
• Meet loan disbursement targets. Bangladesh Bank should be asked to put pressure on the commercial banks to meet their loan disbursement targets particularly those that are earmarked for agriculture, CMSMEs, and other economic activities which have wide ranging welfare implications. Banks should be asked to encourage their branches to disburse loans by exploring the need of potential clients.
• Promote agri-refinance scheme. Agriculture refinance scheme needs to be promoted by the Bangladesh government to incentivise introduction of new technology for planting and harvesting taking into account of the high demand for subsidised credit in order to ensure adequate supply of agricultural crops in the market.
• Implement Basel III. Bangladesh Bank should be asked to implement the Basel III in the banking sector in order to mitigate the risks facing financial sector and improve financial sector governance. Whilst the Bangladesh Bank has relaxed capital adequacy ratio in view of the pandemic, banks should be required to ensure that risk factors are properly dealt with.
• Ensure repayment of loans. Repayment of loans distributed under the stimulus package needs to be given due importance. Bangladesh Bank should be asked to closely monitor the state of repayment of the loan and ensure compliance with Bangladesh Bank regulations.
• Set up an independent banking reforms commission. In view of the state of the banking sector, the government should set up an independent banking reforms commission.
Dr Fahmida Khatun is Executive Director, Centre for Policy Dialogue (CPD); Professor Mustafizur Rahman is Distinguished Fellow, CPD; Dr Khondaker Golam Moazzem is Research Director, CPD; and Mr Towfiqul Islam Khan is Senior Research Fellow, CPD. [email protected]; [email protected]
Research support is provided by Muntaseer Kamal ,Syed Yusuf Saadat, Abdullah Fahad, Abu Saleh Md. Shamim Alam Shibly, Tamim Ahmed, Kashfia Ashraf, Md Asiful Islam, Afrin Mahbub and Nishat Tasnim Mahin. They are with CPD.