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Dhaka Tribune

Debapriya: IMF conditions deepen economic inequality

Urban inequality experienced a modest decrease between 2010 and 2016 but showed a significant increase from 2016 to 2022

Update : 15 May 2023, 08:03 PM

Debapriya Bhattacharya, noted economist and distinguished fellow of the Centre for Policy Dialogue (CPD), said, as a result of International Monetary Fund (IMF) conditions, inequality tends to increase in countries where IMF programs are continued.

He was speaking on Monday at the Bangabandhu International Conference Centre at an event titled "How to Reflect the Concerns of Disadvantaged Groups in the Upcoming National Budget During the IMF Programme Period?" organized by the CPD in collaboration with the Citizen's Platform for SDGs, Bangladesh.

In his presentation, he said: “When the IMF goes to a country with their program, it establishes a singular authority over economic management. So, recently I have said the budget has now become an orphan and the IMF has become its foster father.”

“We are currently observing that Bangladesh's national budget has now become parent-less and the IMF has emerged as a foster-father.”

Despite his belief, the majority of the IMF-mandated reforms have been in place for some time. Those should have been done by the government on its own.

Explaining the impact of the IMF directive on the upcoming budget, he further said that now it is a matter of observation for Bangladesh as the government is implementing conditions stipulated by the IMF. 

The keynote presentation stated that the poverty rate has declined sequentially and across the board over the last decade, as shown by HIES 2010, HIES 2016 and HIES 2022 reports. We have refrained from incorporating prior poverty estimates in light of their incomparability with the recent HIES 2022 findings.

Overall, income inequality in Bangladesh has been on the rise. In rural areas, inequality rose from 2010 to 2016, but then fell somewhat from 2016 to 2022. 

In contrast, urban inequality increased significantly over both eras.

Overall, consumer inequality in Bangladesh has increased slightly. Rural inequality increased significantly from 2010 to 2016, then decreased slightly from 2016 to 2022. 

Between 2010 and 2016, urban inequality decreased little but increased significantly from 2016 to 2022. 

Rural income and consumption inequalities have decreased as a result of the favourable effects of nonfarm activities, agricultural output, and social safety net initiatives. In contrast, rural-urban migration has exacerbated urban inequality, resulting in an increase in poverty.

However, numerous studies including those from the IMF have consistently demonstrated that inequality tends to increase during IMF programs or as a result of IMF conditionalities. (Smith and Vreeland, 2006; IMF, 2007; Chwieroth, 2007; Caraway et al., 2012; Kentikelenis et al., 2015; de Haan and Sturm, 2017; Lang, 2021).

He questioned whether Bangladesh will implement all the terms and conditions of the IMF for taking its loan. 

Debapriya Bhattacharya said that good subsidies should be continued and bad ones should be scrapped. Bad subsidies like the capacity charge for power producers should be reduced and those funds should be transferred to agricultural inputs. 

“Actually we economists had been suggesting Bangladesh to conduct reforms for a long time but it is doing so under the pressure of the IMF,” he added.

He suggested ensuring incremental resource allocation in a targeted fashion taking into account the priorities of the disadvantaged population.

The government should ensure disaggregated data for the disadvantaged groups to make the budget allocations and delivery visible and ensure transparency and accountability, Debapriya said.

The economist recommended introducing participatory, result-based management by involving the intended beneficiaries.

Chief Guest at the dialogue, Planning Minister MA Mannan in his speech said: “We are not dependent on the IMF to prepare budgets, we have prepared previous budgets without taking them into account, and now that they are with us, we will prepare the budget accordingly.”

“We have approached donor groups for loans and we pay this loan with interest. So I don't think there is much to consider about the IMF to prepare the budget,” he also added.

Sultana Kamal, a member of the CPD board of trustees; Fahmida Khatun, executive director of CPD; Mustafizur Rahman, a distinguished fellow at CPD; Rumeen Farhana, a former member of the parliament; also spoke at the event.

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