Reforms must address rising inequality

Although the government estimates inflation over 9 percent, it has crossed double-digits long ago as per NGOs.


May 16, 2023

DHAKA – The government should adjust economic reforms in such a way so that inequality is reined in, said speakers at a dialogue organised by the Citizen’s Platform for SDGs, Bangladesh.

The dialogue was organised to stress that concerns of the disadvantaged should be addressed in the upcoming national budget. It is the first budget after the IMF started disbursing funds under its $4.7 billion loan programme for Bangladesh.

The IMF has attached several conditions for the loan.

Debapriya Bhattacharya, a distinguished fellow of the Centre for Policy Dialogue (CPD), said most of the reform measures built into the IMF loan were overdue. “The government should have carried out these reforms on its own.”

He said numerous studies, including ones by the IMF, have consistently showed that inequality tends to rise during IMF programmes or as a result of IMF conditions.

He suggested that if the government calibrated the IMF conditions in a proper way, inequality could be contained.

“For example, the IMF has recommended flexible interest rates targeting monetary policy modernisation, which we are also in favour of.”

But specialised and subsidised credit schemes for the disadvantaged such as those involved in agriculture and MCSMEs, and women and youth should be continued.

Besides, the IMF’s loan conditions call for a reduction in tax exemption. But tax exemption rationalisation should be done through an open and transparent process and with consultations with stakeholders so that industries, particularly Small and Medium Enterprises, do not suffer, he added.

According to the noted economist, inequality in rural areas declined slightly because of the positive impact of non-farm activities, agricultural output, and social safety net programmes.

“On the other hand, urban inequality increased significantly…,” he said.

Urban inequality has been fuelled by rural-urban migration, said Debapriya.

He suggested that the government implement IMF programme-stipulated reforms and policy steps by taking the inequality concerns into cognisance and in consultation with the disadvantaged.

“When the IMF goes to a country with their programme, it establishes a singular authority over economic management,” he said.

“Recently I have said the budget has now become an orphan and the IMF has become its foster father.”

Speakers at the dialogue held at the Bangabandhu International Conference Centre also said the government should increase the budget allocation for disadvantaged groups and resources must be allocated based on their priorities.

The disadvantaged groups, including climate-vulnerable people, Dalits, children, domestic workers, indigenous and ethnic groups, and micro, cottage, small and medium enterprises, should get priority in the budget allocation.

People with disabilities, migrant workers who have returned home from abroad, senior citizens, transgender people, people of the Urdu-speaking community, women, and youths should also get increased allocations, they said.

The budget should lay proper emphasis on agriculture, climate change and environment, education, skill development, entrepreneurship, and mental health.

Debapriya said, “Disaggregated data of allocations for these groups and sectors should be well presented to make the budget allocations and delivery visible for transparency and accountability.”

At the dialogue, Planning Minister MA Mannan said the government should change their mentality of having big cars and big houses. “Now austerity measures are in place in all fields.”

“The truth is that the poor are deprived. I’ve seen how they’re deprived. They are deprived for procedural reasons. The government allocations don’t always reach them.”

He said there are many tax evaders and defaulters in the country. “It’s an old disease. … but we admit that we are not trying enough,” said Mannan.

The minister said many vested groups are here and they have been in an advantageous position for a long time. Taking action against them might put the government in trouble.

He said there is inflationary pressure in the country, but it decreased a bit last month and wages have slowly been rising.

Former BNP lawmaker Rumeen Farhana said the government, for the last few years, has been shifting blame for the current economic situation on Covid-19, the Russia-Ukraine war, and the global economic downturn.

She said that there is load-shedding every hour, except in posh areas of cities, and it is because of the inability to import energy due to dwindling forex reserves.

Although the government estimates inflation over 9 percent, it has crossed double-digits long ago as per NGOs.

“The onslaught of inflation has not been felt by the affluent class, the top politicians, top businesspeople, but we are facing it … .”

She said the government was taxing the poor by increasing indirect tax, rates of which are similar for the poor and the rich. “This ultimately increases inequality.”

Small entrepreneurs cannot get small loans while top businesses default on thousands of crore taka and enjoy smooth rescheduling facilities, she added.

Dalit community representative Shipon Rabi Das said the country has 55 lakh people of the Dalit community but there is no separate budget allocation for this community.

He demanded separate allocations in the upcoming budget for health and health-related matters of the Dalit community.

Transgender representative Tanisha Yasmin Chaity said after 50 years of independence, the country has come a long way. “But we feel uncomfortable talking about the transgender community and consistently push them away. We are the victims of all kinds of discrimination by the society and the state.

“We need safe homes built for us and opportunities for employment.”

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