54%vulnerable to falling back into poverty
Bangladesh has made significant progress in poverty reduction, with around 8 million people having come out of poverty in the country from 2010-2016, according to World Bank (WB).
“Bangladesh has come a long way in a short time in its fight to end poverty. In 2016, about 1 in 4 Bangladeshis were poor. Bangladesh halved poverty rates in a decade and a half, lifting over 25 million people out of poverty. From 2010-2016, about 8 million Bangladeshis were lifted out of poverty,” said the report.
The report, titled “Bangladesh Poverty Assessment, Facing old and new frontiers in poverty reduction,” was unveiled by WB at a Dhaka hotel on Monday.
The reduction of poverty and improvement to living conditions was mostly driven by labour income, and 90% of the poverty reduction was in rural areas, WB said in the report.
However, 54% of the people are vulnerable to falling back into poverty, it added.
The report showed that robust economic growth has continued driving poverty reduction, but at a slower rate than before. The pace of economic growth has increased, whereas the rate of poverty reduction, declined.
“The progress that Bangladesh has made in reducing poverty in the last decade is remarkable,” said Mercy Tembon, WB country director for Bangladesh and Bhutan.
“But with one out of four people still living in poverty, the country needs to do more, especially in addressing the new frontiers of poverty,” she added.
Tembon further said tackling urban poverty is critical, as more than half the poor in Bangladesh is projected to live in urban areas by 2030.
Finance minister: WB data is old
According to the report, the extreme poverty rate in the country came down to 13% from 17.6% from 2010-2016, while the poverty rate reduced to 24.4% from 31.5% over the same period.
Furthermore, the report said poverty reduction occurred unevenly across the country. While the poverty rate declined moderately in Chittagong, and rapidly in Barisal, Dhaka and Sylhet, it actually increased in Rangpur and stagnated in Rajshahi and Khulna.
However, addressing the report unveiling event as the chief guest, Finance Minister AHM Mustafa Kamal said the WB figures were old and the poverty rate currently stood around the 19-20% mark.
“I hope you will see significant improvement in poverty reduction in the next two or three years, as the government has increased social safety net coverage, and targeted vulnerable groups of people with specific programs to bring them out of poverty,” the finance minister added.
He further said the government is training people so that they may take part in the Fourth Industrial Revolution, and is also looking to create 10 million jobs across the country through the establishment of 100 Special Economic Zones (SEZs).
The finance minister hoped that the poverty rate would come down to less than 3% (zero poverty level) by 2030.
Key factors for poverty reduction
WB said the industry and services, not agriculture, drove poverty reduction in rural areas. Growth in the agriculture sector was slower and did not reduce poverty as much as before.
In urban areas, poverty reduction was driven by manufacturing, particularly the garment sector.
However, a slowdown of job creation in manufacturing may limit its impact on poverty reduction, the report said.
Furthermore, the poverty rate among self-employed people in the service sector has increased.
Mismatch between GDP growth and poverty reduction
“The robust economic growth reduced poverty, but not as effectively as before,” said Maria Genoni, senior economist of Poverty and Equity Global Practice at the World Bank, in her keynote presentation.
From 2005-2010, poverty declined by 1.7 percentage points per year, while it declined by 1.2 percentage points per year from 2010-2016, she said.
On the other hand, GDP rose from 5% to nearly 7% during the aforementioned period, she added.
Higher economic growth has not led to faster poverty reduction, partly because average consumption growth did not keep up with GDP growth, said the report.
The share of private consumption in total GDP declined from 74% in 2010 to 69% in 2016.
Scope for slipping back into poverty
The report said 54% of the people who have come out of poverty are vulnerable to falling back into it.
“We cannot say there is no possibility of falling back into poverty. It is not that everyone would fall back, but there are issues such as global economic crisis, natural disasters, health risks and accidents, which can bring a family back to poverty again,” Power and Participation Research Centre (PPRC) Executive Chairman Hossain Zillur Rahman said.
He added that it is the responsibility of the government to reduce the risk of falling back into poverty through policy measures.
Finance Minister Kamal said there is no cause to worry about falling back into poverty, as the government will take steps to take care of those who are vulnerable.
WB Senior Economist Genoni said Bangladesh should think of new growth drivers by adopting traditional and fresh solutions to reduce poverty faster.
“The report highlights that traditional drivers of poverty reduction played a role, but also notes the limits of some of these drivers in bringing about progress,” she said, stressing the need for development of neighbourhood infrastructure, public transportation, the urban health safety net, low-cost housing, and skill development.