Moving up the economic ladder
Bangladesh has made remarkable progress in reducing poverty, supported by sustained economic growth. Based on the international poverty line of $1.90 (using 2011 Purchasing Power Parity exchange rate) a day, it reduced poverty from 43.8 percent in 1991 to 20 per cent by 2018.
Life expectancy, literacy rates and per capita food production have increased significantly. Progress has been underpinned by steady growth in GDP. Bangladesh reached the lower middle-income country status in 2015. In 2018, Bangladesh fulfilled all three eligibility criteria for graduation from the UN’s Least Developed Countries (LDC) list for the first time and is on track for full fledged graduation in 2024.
Sustained economic growth has created an increased demand for energy, transport and urbanization. Insufficient planning and investment have resulted in infrastructure bottlenecks, congestion and pollution. To become an upper-middle income economy, continued sound macroeconomic management, financial sector stability, structural reforms, investment in human capital, higher female labor force participation, and global integration will be important. Improving infrastructure as well as the business climate would allow new productive sectors to develop and generate quality employment.
Bangladesh is both an inspiration and a challenge for policymakers and practitioners of development. While the country recorded strong performance in income growth and human development, Bangladesh faces daunting challenges with an increased level of vulnerability with about 39 million people still living below the national poverty line.
The COVID-19 pandemic will deepen the challenges including a probable decline in exports, lower private investment, and job losses. Investment and exports are likely to continue to suffer amid uncertainty about the recovery of global demand. The poor and vulnerable are more impacted with income loss and poverty may rise. The implementation of the government’s COVID-19 response program will remain a paramount priority.
Creating more and better jobs for its youth remains a critical priority for Bangladesh to turn around and achieve its development vision. To do so, Bangladesh will need to remove the barriers to higher investment posed by low access to reliable and affordable power, poor transportation infrastructure, limited availability of serviced land, uncertain and complex business regulation, among others. Challenges related to COVID-19, rapid urbanization and climate change need to be addressed through long-term planning.
With the right policies and timely action, Bangladesh can accelerate its recovery from the impact of corona virus and continue to progress towards upper-middle income status.
It is very probable that the incumbents in governance in Bangladesh while preparing the next fiscal year’s budget thought the best they can do is to give maximum encouragement to ‘productive forces’ through the budgetary instruments. It is only the productive forces of businesses, industries, entrepreneurs and services that produce more and more wealth or resources. In the process, they also vitally create jobs and income and pave the way for more investments and cyclically more jobs and more income, plus revenues for the government.
But there is no doubt the budgetary policy of aiding productive forces should not be pushed too hard or too far. Specially, it should be monitored very closely whether the productive forces on whom the government wants to bank on so much rises to the occasion and plays their part delivering what is expected from them. Continued budgetary support to them needs to be linked to their actual positive response to the budgetary stimuluses.
At the same time and before the budget is finally endorsed, it should be sincerely tried to expand the coverage of the social safety programmes in the budget and to correctly identify pandemic hit families and entrepreneurs and extend greater assistance to them.