Home ›› 29 Jan 2023 ›› Opinion
Bangladesh was classified as a least-developed country immediately after it became an independent country. Around 80 per cent people of newly-born Bangladesh lived below the poverty line.
According to the latest Household Income and Expenditure Survey of Bangladesh Bureau of Statistics (BBS), the poverty rate dropped to 24.3 per cent in 2016. Reducing of poverty rate had been one of challenging tasks for then government. Once, maintaining of the global standard culture was difficult for the people living in Bangladesh. Now, per capita income in Bangladesh increased from $ 120 in 1972 to $2,824 in 2022. Against the backdrop of increasing per capita income was to jack up social safety net programmes (SSNPs) in Bangladesh. Now, many programmes in the title of ‘social security programmes’ are being launched as part of compliance of constitution in Bangladesh. Social security for citizens is mandated mainly by Article 15(d) of the constitution of the people’s republic of Bangladesh.
Bangladesh achieved lower-middle-income country (LMIC) status in 2015 for outstanding performances in many fields. Increase of per capita income and poverty rate reduction are considered as key indicators of becoming LMIC.
Now, Bangladesh aspires to become upper -middle-income country (UMIC) by 2031. Prior to achieving HMIC status, Bangladesh has to attain Sustainable Development Goals ( SDGs) by 2030 where SDG-1 advised to bring poverty rate down to zero. Bangladesh is on the track to reach its goals through revising and introducing policy guidelines from time to time.
It is possible to attain economic targets if public expenditure for social security programmes are scaled up. If the government fails to make sure social protection, economic affairs-related dreams will never be come true. According to the World Bank, social protection systems help individual and families, especially the poor and vulnerable, cope with crises and shocks, find jobs, improve productivity, invest in the health and education of their children and protect ageing population.
Despite knowing the importance of social security programmes, the concerned sector is not given due importance at the time of budgetary allocation. In the national budget for 2022-23 fiscal year, budgetary allocation for social security programmes was 16.75 per cent of total budget. The allocation accounts for 2.55 per cent of GDP. Excluding health care, public expenditure on social protection in the world is 12.9 per cent of GDP on an average . public expenditure on social protection is 16.4 per cent of GDP in high-income countries, 8.0 per cent in upper-middle-income countries, 2.5 per cent in lower-middle-income countries, 1.1 per cent in low-income countries.
Bangladesh government is already in final stage in the affairs of introducing ‘Universal Pension Scheme’ (UPS) as part of election manifesto. The ruling party promised to initiate the timely scheme during 2008 general election campaign. The objective of introducing UPS is to expand economic protection of the country’s aging population whose age 60 or above in Bangladesh context. Their number is increasing in Bangladesh as well as in the world. They need to be brought under the umbrella of UPS programme for making sure financial protection from the state level. According to newspaper report, Bangladesh has about 15 million people aged 60 and above. by 2050, their number is expected to increase to 36 million.
Currently, the world has nearly 720 million people whose age 65 or above. considering their growing numbers, UPS programme came as blessing for them, no doubt. I personally appreciate the government move in introducing UPS programme. Under Universal Pension Management Bill 2023, national pension authority will be constituted where 15-man board of directors will guide the authority. Mainly, UPS programme has been designed for the people aged between 18 to 50 years. In the form of monthly premium, the people have to credit prescribed amount in the concerned account for at least 10 years. There is also a provision for the people aged above 50 years of availing the facility on condition of contributing the subscription for at least 10 years. The subscribers will get Tk 34, 000 at age 60 after monthly deposit of Tk 500, Tk 64,000 against monthly deposit Tk 1,000. It is a great good news that Bangladeshi expatriates, who serve globally, have been come under the scheme. The people employed at government and semi government organizations , autonomous body are allowed to avail the facility under UPS.
UPS has been drafted in view of growing aging population who need financial and social protection. The state has many responsibilities to protect the aging population from vulnerabilities. According to Bangladesh Bureau of Statistics (BBS), average life expectancy in Bangladesh stood at 72.8 years in 2020 with an increase of 3.8 years from 69 in 2011. The number of people of age 60 or above is considered senior citizens their number is around 9.28 per cent of total population. The BBS said old people will make up 20 per cent of total population by 2031. Except retired public sector people, no private sector people has no option to withdraw pension money. Only old age allowance is provided to the senior citizens under social safety net programmes. But, still most people remain out of old age allowance facility.
According to paper issued by the government, UPS fund will be created from subscription of individual and organizations, investment, government donation for low-income group and other sources. The subscribers will get tax facility, the paper said. Some developed countries introduced UPS depending on revenue earnings. If UPS fund needs additional money, the required money will be financed from the national budget that relies on revenue earnings. Bangladesh has the lowest tax-to-GDP ratio in the world. Nepal has the lowest tax-to-GDP percentage at 19.8 per cent and Namibia has the highest tax-to-GDP rate at 30.5 per cent that run UPS . Tax-to-GDP ratio in Bangladesh is not more than 9.0 per cent. In view of narrow fiscal space, the decision of introducing UPS will be a challenging task. A dozen mega projects are under external financing that has to be repaid soon. Misusing of UPS fund will turn the programme distorted. Many developed countries like Netherlands, Iceland, Denmark, Germany, Australia, Canada, and Switzerland have successfully implemented universal pension schemes.
The 2015 National Social Security Strategy (NSSS) might not address current need of the needy people. In Bangladesh, around 39.9 per cent people get old age allowance, 7.6 per cent get government retirement pension, 10 per cent get private sector employee get provident fund, BBS and Ministry of Finance sources. Still, more than 40 per cent people whose age above 65 do not receive any kind of pension. Since the number of people over 60 years of age is projected to rise 42.3 million (20 per cent of total population) by 2051, introducing of UPS will be wise. UPS programme will help to reduce existing wealth and income inequality. To achieve SDGs, UPS programme will help in many ways. Despite having some challenges due to limited resources, UPS will come as blessing for ageing people.
The writer is an economic affairs analyst. He can be contacted at mazadul1985@gmail.com
