The outgoing 2018-19 fiscal year saw the Bangladesh economy continue on its accelerated growth trajectory. GDP growth reached a record 8.13%, crossing the 8% mark for the first time. However, challenging external sector performance continued in FY19 and led to a current account deficit of USD 5bn in the Jun-Apr period, which led to BDT depreciating by 1% YoY in June 2019. Low deposit growth rates resulted in tight liquidity situation and a general increase in interest rates, which negatively affected the capital market.
The GDP growth target for FY19 was set at 8.2%, which might prove challenging given rising interest rates and falling private sector credit growth. Inflation target was set at 5.5%, which is close to the March 2019 level of 5.48%. The proposed budget size is BDT 5,231.9bn, which is 18.22% larger than the previous budget. The revenue target is BDT3,778.1bn, 19.33% higher than FY19. The budget deficit was projected to be 5.04%, roughly the same as FY19.
Having adopted the National Social Security Strategy (NSSS) in 2015, Bangladesh is currently implementing various programmatic and institutional reforms to make a transition from an ad hoc and fragmented safety nets-based system to a more structured and streamlined approach to help beneficiaries address their lifecycle risks along with mitigating covariate and idiosyncratic shocks. To accomplish the NSSS-articulated long-term vision of the social security system, certain goals are sought to be achieved under a 10-year first phase (2015-25) while a roadmap for an additional phase starting from 2026 has also been envisaged. The Covid-19 pandemic has thus struck Bangladesh with the continuation of erstwhile social protection interventions, which have been known to be incompatible with the need of a rapidly transforming economy. It is also becoming clear that, perhaps a completely reformed system – as envisaged in the NSSS – would still be not robust enough to grapple with the crisis of this magnitude.
There are therefore important lessons in building an appropriate social protection system of the future. There is ample room for pursuing a more proactive social protection policy stance. As the crisis continues to unfold, there remain opportunities for bold policy options in reaching out to – with more effective and appropriate assistance – millions of people who have been severely affected. It also represents an opportunity to revisit the current social security support mechanism in building a comprehensive and fit-for-purpose system that should be pursued along with the on-going NSSS reforms. Recommendations are provided here with the objective of mitigating poverty and vulnerability consequences as inflicted by Covid-19 while at the same time making progress towards instituting a strengthened social protection architecture. The Covid-19 mitigation measures involving economic shutdown caused massive income and job losses. A PPRC-BIGD survey, undertaken in April 2020, found that people of all population segments incurred a significant income loss between February and April 2020, while it was the extreme and moderate poor people that were hardest hit – suffering a-three-fourths loss in income on average. Informal sector workers e.g. restaurant workers, rickshaw pullers, day labourers, artisans, domestic helpers, agricultural labourers, petty business owners, shopkeepers, saloon/parlour workers, etc. were severely affected (PPRC/BIGD, 2020). Various estimates suggest that the temporary job loss for the two-months-shutdown period could be in the range 12-17 million. The weakness in employment, reduction in income and depressed economic activities have certain poverty implications. Currently, there is no official estimates of the incidence of poverty due to Covid-19. However, simulations and rapid assessments by several think-tanks, based on different assumptions, suggest that the COVID-induced ‘new poor’ would be in the range 16–42 million.