• Friday, Jul 10, 2020
  • Last Update : 04:50 pm

Covid-19 fallout: Income drops to create 16.4m new poor this year

  • Published at 03:46 pm June 24th, 2020
man sleeping streets dhaka poor poverty
File photo of a daily labour at Karwan Bazar in Dhaka Rajib Dhar/Dhaka Tribune

Under a post-lockdown optimistic scenario, the country’s overall poverty would increase by 25.13%, where rural poverty will be 24.23%and urban poverty will be 27.52%

Bangladesh will have 16.4 million new poor in 2020 as the incomes of working class in urban and rural areas have fallen sharply due to the prolonged lockdown.

A research paper titled “Poverty in the time of Corona: Short-term Effects of Economic Slowdown and Policy Responses through Social Protection”, conducted by Binayak Sen, Research Director of Bangladesh Institute of Development Studies (BIDS), estimated the figure.

The report was unveiled on Wednesday at a virtual conversation titled “BIDS Critical Conversations 2020 In the Shadow of Covid-19 - Coping, Adjustments, and Responses".

The Bangladesh Policy Research Institute (BIDS) organized the program.

Under a post-lockdown optimistic scenario, the country’s overall poverty would increase by 25.13%, where rural poverty will be 24.23%and urban poverty will be 27.52%

“We ran several scenarios – representing successive severity of lockdown -- under the “wealth plus labour status” approach. In a scenario where there is an 80% drop in income for labor class in urban areas and 10% drop in income for labor class in rural areas. In the “hard lockdown” exercise, we would have 16.4 million new poor in 2020,” Binayak said in his presentation.

“If we consider a 25% higher poverty line, then an additional 16% to 20% of population would be in poverty in rural and urban areas. If we update our age-old poverty line accordingly, it will result in a much higher poverty where rural poverty would be 45%, and urban poverty would be 36%,” said the Research Director at the BIDS.

To sum up, we have two kinds of vulnerabilities in poverty — one relates to the risk of slippages of the near-poor into poverty, and the other pertains to the risk of slippages of the moderate poor into extreme poverty, said the economist.

Both kinds of vulnerabilities need to be kept in view while designing programs and policies in times of crisis such as Covid-19 because they may demand different solutions and approaches, he added.

Can social protection “protect” new poor?

Social protection programs, a little relief and many pitfalls, which needs to be redesigned for feeding the new poor and pulling them out of poverty.

Notwithstanding the overall progressivity in the incidence of safety net benefits, a bulk of the transfers end up in ‘non-deserving’ non-poor groups, the research findings showed. 

The share of Comfortable Non-Poor (CNP) is about 30% in case of allowance programs, 32% in case of food-supported programs, 44% in case of maternity allowance, 51% in vase of stipend schemes, and 33% in case of ‘other’ social protection programs in rural areas, it added. 

“We need to reform the present social protection system for serving three categories of people such as extreme poor, moderate poor, and the new poor,” said Sen.

For this to happen, the country needs to stop massive leakages of the existing benefits to the CNP category, he adds. 

The research organizations also suggested linking the beneficiary participation in social protection programs with the NID cards digitally and facilitate the transfer to the deserving poor in times of distress.

But, Covid-19 shock possibly changed the relative ranking of these households especially that of the VNP households, many of whom are now likely to be among the ranks of the poor, it added. 

Zero poverty by 2031 at risk  

An 8% GDP growth can take us to the Sustainable Development Goals (SDGs) threshold of zero poverty by 2030.   

If we conduct poverty projections to 2031 from the derailment caused by the Covid-19 shock in 2020, grim realities emerge inescapably, said the survey.

Bangladesh was on track in meeting the SDGs of ‘zero poverty’ by 2031 comfortably under a 7% average growth scenario, it added.

“Covid-19 has altered this comfortable on track situation altogether. Now it appears that, with a sharp rise in poverty from the projected 20.3% in 2019 to 25.1% in 2020 due to Covid-19 shock, Bangladesh’s GDP needs to grow at an average 8% per year over the next decade to meet the SDG target of zero poverty by 2031, said Binayak Sen. 

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