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Dhaka Tribune

Extreme poverty trebled in 2020

Finds a SANEM study

Update : 24 Jan 2021, 12:16 AM

Bangladesh’s extreme poverty rose to 28.5 per cent and the poverty rate 42 per cent in 2020 as the pandemic hit the country’s economy hard, says a survey report. 

South Asian Network on Economic Modeling (SANEM) revealed the findings from its latest survey titled “Covid-19 Fallout on Poverty and Livelihoods in Bangladesh” through a virtual dialogue on Saturday.   

The survey was conducted over 5,577 households from 500 Primary Sampling Units (PSUs) distributed across eight divisions during the November-December period of 2020. 

The survey's objective was to unravel the pandemic's impact on three broad indicators, namely Poverty, Inequality, and Employment (PIE). 

Based on the updated poverty lines, Sanem's survey found the poverty rate has increased from 21.6 per cent in 2018 to 42 per cent in 2020 while the extreme poverty rate has risen from 9.4 per cent in 2018 to 28.5 per cent in 2020, said Selim Raihan, executive director of SANEM in his keynote presentation. 

The poverty rate has increased in both urban and rural areas. 

The upper poverty rates in the rural and urban areas were 45.3 per cent and 35.4 per cent respectively. 

The lower poverty rateswere 33.2 per cent and 19 per cent in rural and urban regions, respectively.  

“High path dependency in lower-income households implies that households that were already poor in 2018 may have experienced a poverty trap and thus remained poor in 2020,” said Zahid Hussain, former lead economist of the World Bank’s Dhaka office.

It is also necessary to assess the influence of geographical location, occupation, employment status and digital access on the prevalence of poverty among these households, he added. 

Mymensing witnessed the highest rise in extreme poverty to 38.9 per cent, followed by Rajshahi and Rangpur at 37.4 per cent. Chittagong’s extreme poverty is the lowest at 18.8 per cent. 

On the other hand, poverty rose to 57.3 per cent in Rangpur, followed by Rajshahi at 55.5 per cent and Mymensingh at 46.2 per cent. Barisal saw the lowest rate of 29.3 per cent. 

Compared with 2018, the average per capita household expenditure in 2020 has decreased by 45 per cent, 29 per cent and 17 per cent in extreme poor, moderate poor and vulnerable poor households, respectively. 

At the same time, it has increased by 6 per cent in non-poor and non-vulnerable households, the survey found.

For this analysis, households have been classified as "old-poor" and "new-poor" depending on whether they were already poor prior to the pandemic or whether they have fallen below the poverty line as a result of the pandemic.

In households classified as poor prior to the pandemic, the heads of 37 per cent of them are self-employed, 20.5 per cent wage-employed and 39.5 per cent are day labourers.

On the other hand, in households that have fallen into poverty as a result of the pandemic, 42.3 per cent household heads are self-employed, 23.9 per cent are wage-employed and 30.2 per cent are day labourers. 

Among households classified as "old-poor", 43.4 per cent rely on agriculture, 5.2 per cent on the industry, 46.5 per cent on service, 0.3 per cent on government allowances and 3 per cent on remittance source of income. 

On the other hand, among the new-poor households, 36.6 per cent rely on agriculture, 6.4 per cent on the industry, 51.2 per cent on service, 0.4 per cent on government allowances and 3.2 per cent on remittances as their primary source of income. 

As per the survey findings, only 17.3 per cent households claimed that they were involved in economic activities without any disruption, 55.9 per cent claimed decline in income despite having work, 8.6 per cent claimed long work and 7 per cent claimed that their working hour had reduced. 

In addition, 33.2 per cent respondents claimed their work had stopped for a while during the outbreak. 

The average income of the main earner of households declined by 32 per cent for self-employed workers, 23 per cent for wage-employed workers, 29 per cent for day laborers and 35 per cent for the other categories between February and October 2020. 

In reaction to the crisis, households adopted a variety of coping strategies. 

About 49 per cent resorted to borrowing, 32.4 per cent relied on savings, 27.3 per cent on reduced expenditure on non-food items, 27 per cent changed their dietary patterns involuntarily, while 16.67 per cent resorted to donations from friends and relatives.

The survey findings also stated that 82.1 per cent households claimed that they received less remittance from abroad while 64 per cent claimed that they received less remittance from within the country compared with what they received before the pandemic.

Regarding remittance earning, Hussain said that the conversion of remittance transfer from informal to formal channels has increased the liquidity of dollar in our local foreign currency market.

This has helped to lower interest rates and enhanced the lending ability in the banking sector, which will also be a useful tool in the macroeconomic management of the crisis.

However, as remittance has not sufficiently reached households at the micro-level, the surge in remittance earning has not stimulated private consumption expenditure. Thus, it may not have a major impact on economic growth, he added. 

However, experts opined that there is possibility of a K-shaped recovery.  

“To understand whether the crisis will persist, it is important to figure out the key areas that have been most negatively impacted and whether it is possible to replenish the economic losses through short-term initiatives,” said MM Akash, a professor of Dhaka School of Economics.

There is a possibility of a K-shaped recovery in Bangladesh in which different income groups of the population recover at different rates and magnitudes, he said.

Subsequently, he recommended that future studies should consider assessing the impact of the pandemic on the ultra-rich population in order to uncover the complete picture of recovery, he added. 

Since non-food expenditure has been primarily affected in poor households, it is necessary to identify non-food consumption areas, including spending on education, health etc, that have been most commonly sacrificed during the pandemic and include them in policy formulation. 

To ensure sustainable and evidence-based development pathways in the post-Covid scenario, it is crucial to make a sound assessment of the pandemic's multidimensional impact on the people, Raihan said.

In this context, understanding the impact of the covid-19 on poverty, inequality and employment remains an essential prerequisite.

As a result of the pandemic, households had to confront various employment issues such as losing work, not receiving due wages, workplace closures etc, he added. 

In overcoming the challenges caused by the covid and to reduce poverty, Sanem highlighted five key suggestions that emerged from the survey: management of the Covid-19 crisis, increasing social safety net coverage including direct cash transfer to the poor, price stability of essential products, reduction of corruption, and creating employment opportunities.

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