Looming crisis of poverty rise: WB warning and the path forward

The World Bank's recent 'Bangladesh Development Update' report serves as a stark warning regarding the country's economic trajectory. The report forecasts that an additional 3 million people in Bangladesh are at risk of falling into the abyss of extreme poverty by 2025. This is more than just a statistics; it's a prediction of deepening hardship for millions, seriously threatening the remarkable strides Bangladesh has made in poverty alleviation over the past few decades. The projected increase in the extreme poverty rate from 7.7 per cent to 9.3 per cent is a clear indicator of the nation's economic vulnerabilities and widening inequalities.

Extreme poverty is defined internationally as living on just $2.15 or less per day. In Bangladesh, where the national poverty line is drawn at a minimum monthly expenditure of Tk 3,822, this forecast represents a terrible nightmare for vulnerable households. The World Bank's analysis suggests that if current economic trends persist, the total number of people living in extreme poverty could reach 15.8 million by the end of 2025. Including those below the national poverty line, the total number of poor people could swell to approximately 39 million. The potential for such a massive segment of the population to face extreme uncertainty in their lives and livelihoods poses an immense challenge for the country.

This looming crisis is not sudden; it stems from several complex and interconnected factors. The most immediate and damaging cause is the persistent erosion of people's real income. For a considerable period, Bangladesh economy has been plagued by high inflationary pressure, often exceeding 10 per cent. Unfortunately, wage growth has consistently failed to keep pace with this rising cost of living. This damaging trend became particularly pronounced from January 2022 onwards. Latest data show that while the inflation rate stood at 9.35 per cent in March 2025, the average wage growth was only 8.15 per cent. This means that the prices of essential goods are increasing faster than the earnings of ordinary people, directly reducing their real purchasing power and driving down their living standards.

This relentless inflation acts as an 'invisible tax', disproportionately burdening the lower and middle classes by constantly eroding their capacity to meet basic needs. Their struggle to afford essentials like food, shelter, healthcare, and education is intensifying. For those who were just barely above the poverty line, even marginal price hikes are catastrophic, forcing them to cut back on food quantity or nutrition, pull children out of school, or fall into high-interest debt traps. The diminishing value of their money makes falling below the poverty line increasingly likely, complicating the entire socio-economic landscape. This inflationary impact is not limited to urban areas but severely affects rural populations, particularly those with fixed incomes.

Beyond inflation, a weak labour market is a significant contributor to rising poverty. Economists point to a confluence of factors, including political instability, structural weaknesses, and policy challenges, as responsible for the current economic slowdown. Key economic indicators like revenue collection, Annual Development Programme (ADP) implementation, and private sector investment are weakening. The National Board of Revenue (NBR) faces a substantial revenue deficit of around Tk 65,000 crore in the current fiscal year. This deficit curtails the government's capacity to fund crucial development projects and expand social security programmes, leading to slower project implementation or outright cancellations.

ADP implementation has reportedly hit its lowest point in six years. This stagnation in public investment directly reduces opportunities for job creation, as government spending on infrastructure and development is a vital source of employment. Simultaneously, political uncertainty and the economic slump have deterred private sector investment. Businesses are reluctant to invest or expand, bank credit has tightened, starting new ventures is difficult, and many existing businesses are struggling for survival. This combination has constricted the labour market, hitting low-income and informal sector workers the hardest. Daily wage earners, small traders, transport workers, and informal labourers face precarious job security and declining incomes, further exacerbating poverty.

The economic downturn not only limits income opportunities but also deepens societal inequality. The crisis has starkly exposed the widening gap between the rich and the poor. While the upper and middle classes can use their assets, savings, or alternative income streams to weather inflation and the slowdown, survival is becoming increasingly complex for those near or below the poverty line. They are being pushed into the poverty trap one after another. This escalating inequality is not just an economic issue; it fuels social instability and division and, in the long run, hampers economic mobility and social cohesion. When a large segment of society is denied economic opportunity, national development is ultimately hindered.

The impact of this poverty surge is not merely immediate; it carries significant long-term and generational consequences. Children raised in extreme poverty often suffer from malnutrition, chronic health issues, and a lack of access to quality education. Malnutrition impairs their physical and mental development, while educational deficits limit their prospects for better jobs and improved lives. This makes breaking the cycle of poverty incredibly difficult, perpetuating it across generations and severely impacting a country's human capital development. The gradual shrinking of the middle class is another worrying trend. The middle class is a key driver of consumer demand, and reduced purchasing power dampens overall economic activity. Moreover, they play a crucial role in innovation, entrepreneurship, and social stability, making their decline a negative sign for the country's future.

Poverty in Bangladesh is fundamentally a multidimensional and complex social challenge, not just an income deficit. The Bangladesh Bureau of Statistics (BBS) employs a multidimensional poverty measure that considers around 119 indicators, including health, education, nutrition, housing, sanitation, water, electricity, information technology, and financial services, in addition to income. This acknowledges that someone can earn an income but still be considered poor if they lack healthcare, safe water, quality education, or adequate housing. Poverty, therefore, is more than a monetary figure; it's a profound deprivation of opportunities and fundamental human rights. While the World Bank forecast primarily focuses on income-based extreme poverty, the related multidimensional deprivations are equally concerning.

Addressing this severe and complex crisis demands urgent and coordinated action. Controlling inflation must be the top priority, requiring sound monetary policy from the Bangladesh Bank. Improving food and fuel supply chain management and preventing manipulation by unscrupulous traders and syndicates are essential for market stability. Furthermore, effective initiatives are needed to boost the real income of low-income and informal sector workers. Increasing the minimum wage, particularly in large labour-intensive sectors like the garment industry, is a crucial immediate step. Simultaneously, existing social safety net programs (such as old-age allowance, widow's allowance, maternity allowance, VGF) must be expanded, increasing both the number of beneficiaries and the allowance amounts in line with current inflation. These programmes provide a vital lifeline for people experiencing poverty and extreme poverty. The government must also offer special incentives and policy support to stimulate employment generation in the private sector.

Restoring the labour market and creating jobs are paramount for poverty alleviation. This first requires restoring political stability to rebuild confidence among domestic and foreign investors. Accelerating the effective implementation of development projects, especially those focused on rural development, health, education, and infrastructure, is vital. Investments in these areas directly create jobs and improve living standards. To finance these crucial programmes, revenue collection must be significantly increased by expanding tax coverage, preventing tax evasion, and making the tax system more efficient and citizen-friendly.

In the long term, Bangladesh must concentrate on building a more sustainable and inclusive economy. Diversifying the economy beyond over-reliance on the garment sector is essential. New sectors like agro-processing, information technology, light engineering, and tourism need robust encouragement for investment and job creation. Human resource development must be prioritised through investment in quality education and healthcare to transform the population into a national asset.

Expanding financial inclusion, making banking and financial services accessible to the poor and disadvantaged, will empower them to save and invest in small enterprises. Social safety nets need continuous strengthening and refinement to protect the most vulnerable from economic shocks. Special attention must be given to women, children, persons with disabilities, and rural communities to ensure that 'no one is left behind' in the development process.

The warning from the World Bank arrives at a critical juncture for Bangladesh's policymakers, civil society, and the entire nation. Millions plunging into extreme poverty is not merely a humanitarian catastrophe; it poses a profound threat to the country's economic and social stability. Still, with the right policies, transparency, accountability, and active public participation, this crisis can be transformed into an opportunity for more inclusive and sustainable development.

Dr Matiur Rahman is a researcher and development worker.

matiurrahman588@gmail.com