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The needy left out as allocation feeds pension, savings tools

Hasan Arif
29 May 2023 00:00:00 | Update: 29 May 2023 00:07:02
The needy left out as allocation feeds pension, savings tools

The government’s social safety net programmes are leaving many of the poor out as a big chunk of the allocation for the sector goes to provide pensions to government officials and paying interests of savings tools.

Experts have long been calling on the government to exclude the spendings on pension and savings tools from the social safety net sector to ensure that it is benefitting the neediest.

The International Monetary Fund (IMF) has also asked the government to bring the two sub-sectors out of the social safety net sector as part of its $4.7 billion loan programme for Bangladesh.

Pension, savings tools eat away 35% of allocation

An analysis of five fiscal years, including the current year, reveals that if the spending on pension and national saving certificate interests are excluded, the allocation for the social safety net sector would be 30-35 per cent lower.

In the ongoing fiscal year 2022-23 (FY23), the government allocated a total of Tk 1,13,576 crore or 2.55 per cent of the gross domestic product (GDP) for the social safety net programmes. Of the allocation, Tk 7,907 has been earmarked for paying interests of savings tools and Tk 28,037 crore for paying pensions of retired government employees.

If the expenditure on the two sub-sectors in question is excluded, the total allocation for the sector stands at Tk 77,632 crore or 1.74 per cent of the GDP.

IN FY22, savings tools interest payment and pensions accounted for Tk 74,015 crore while the total allocation for the social safety net sector was Tk 1,07,614 crore or 3.11 per cent of GDP.

In FY21, the total allocation for the social safety net sector was Tk 95,574 crore or 3.01 per cent of GDS. If the expenditure on the two sub-sectors in question is left out, the total allocation would be Tk 65,922 crore or 2.07 per cent of GDP.

The allocation for the sector was Tk 74,367 crore or 2.58 per cent in FY20. The allocation would decline to Tk 44,591 crore if spending on pension and savings tools is left out.

Tendency to show higher allocation

“There is a tendency to show higher allocation for the social safety net programmes by including the expenditure on pensions, bond interest, or interest payments on stimulus packages,” Zahid Hussain, former lead economist of World Bank Dhaka office, told The Business Post.

He said, “There are many expenses which actually do not fall under the social security sector but are being shown as its part. These include, educational assistance and freedom fighter allowance. If these two allowances are included in the social security sector, why not include the subsidy given by the government on agricultural loans?”

According to Zahid Hussain, whatever percentage of GDP is shown as expenditure on social security programmes, the actual expenditure is less than 1per cent of GDP.

However, there is no standard as to what percentage of GDP should be spent on social security programmes in Bangladesh or in the global context. This expenditure is mainly determined based on the number of poor and destitute in the country.

Repetition expected in FY24

According to the decision of an inter-ministerial meeting held at the Secretariat on April 3, Finance Minister AHM Mustafa Kamal is expected to propose to allocate Tk 1,19,000 crore for the social safety net sector in the upcoming budget for FY24.

The allocation has been planned with an aim to increase the coverage and the allowances for each beneficiary in the next fiscal.

However, going against the IMF’s condition, the next budget is expected to show Tk 11,000 crore for savings tools interest payment and Tk 30,137 as retirement allowance as part of the social safety net allocation.

Economist Zahid Hussain said, “The most concerning thing is that a large part of the allocated money is for various sectors including pensioners. As a result, it is not clear how much money is actually going to the poor or the backward communities. The funds of the programmes are not reaching all types of poor people.

However, speaking at a budget income-expenditure presentation meeting recently, Prime Minister Sheikh Hasina said the scope of the country›s social security programmes need to be increased to ensure that the needy and poor people of the country get financial benefits.

She also said even in the 1980s, parents and family members used to hide disabled children at home. In many families, widows were not given any importance. Parents or elders were not important at home. Now that they come under the government’s social security, the importance of the beneficiaries to the family has increased. The state has created a relationship with these neglected people through social security.

IMF conditions

Social safety in the budget is provided in the form of cash allowances, government jobs, and education and health incentives for poor and vulnerable families.

Social safety net programmes beneficiaries in Bangladesh include widows, elderly population, physically challenged, pregnant mothers, freedom fighters, retired civil servants etc.

In addition, cash-based social security schemes, including food for work, cash for work, test relief, food sales in the open market and stipends for students.

Finance advisor of the former caretaker government. AB Mirza Azizul Islam said that the amount of money to the beneficiaries must be increased during the country’s 9 percent inflation. Otherwise, this program will not work.

The IMF has set deadlines for raising the social security spending every year.

According to the terms of the IMF, Tk 60.05 crore should be spent by March this year, Tk 103.30 crore by June, Tk 15.5 crore by September and Tk 30.99 crore by the end of December.

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