Income inequality on the rise: Muhith

Income inequality is on the rise in Bangladesh although the rate of extreme poverty dropped significantly, Finance Minister AMA Muhith said yesterday.

More than 25 percent people live in poverty and around 11 percent in extreme poverty, according to the Planning Commission.

The government plans to bring the country's extreme poverty rate down to 4.5 percent by 2021, riding on expectations that gross domestic product will grow 7 percent a year in the next six years.

The proportion of the extremely poor population declined to about 18 percent in 2010 from 41 percent in 1990, according to the official Household Expenditure Survey.

“Income inequality has gone up, but we should also focus on the positive aspects, and that is, the rate of extreme poverty has dropped. So the government can take pride in this success.”

“Income inequality will widen, but it should not be allowed to increase such that rebellious incidents take place,” Muhith said at a meeting with the leaders of the Economic Reporters Forum (ERF) at his secretariat in Dhaka.

More than 15 million Bangladeshis have moved out of poverty since 1992, according to a World Bank overview of Bangladesh economy. Bangladesh has maintained an impressive track record on growth and development.

In the past decade, the economy has grown at nearly 6 percent per year, and human development went hand-in-hand with economic growth. Poverty dropped by nearly a third, coupled with increased life expectancy, literacy, and per capita food intake, the WB said.

While poverty reduction in both urban and rural areas has been remarkable, the absolute number of people living below the poverty line remains significant.

Despite the strong track record, around 47 million people are still below the poverty line, the WB said. There are also many people who could fall back into poverty if they lose their jobs or are affected by natural disasters.

In Bangladesh, income inequality measured by the Gini coefficient increased to 0.458 in 2010 from 0.350 in 1984, with a similar trend in both rural and urban areas, according to a study -- Human development in South Asia 2015: The economy and the people. The Brac Institute of Governance and Development unveiled the study report in December last year.

Between 1984 and 2010 in Bangladesh, the share of the poorest 20 percent of population in national income decreased from 2.9 percent to 2 percent, while for the richest 20 percent of population, it grew from 28.3 percent to 37.6 percent.

Income inequality that has risen over the last three decades in Bangladesh indicates a low impact of growth for the poorest households, the report said.

Meanwhile, at the meeting with Muhith yesterday, the newly elected ERF leaders put forward some proposals for the next budget.

The minister said he will not impose any fresh value added tax (VAT) on retail business in the upcoming national budget for fiscal 2016-17. Currently, the government realises VAT at 15 percent on retail sales.

The government will mandate the use of electronic cash registers (ECR) in the next budget so that businessmen cannot evade VAT.

At present, businesses, who are shifting from the use of traditional accounting methods to ECR, sometimes evade VAT, the minister said.

The government has no plan to increase duty on the import of agricultural machinery, as it may affect poor cultivators, he added.

Like in the previous fiscal years, the government would allocate a handsome amount for training and human resource development.

“But, I have no plan to allocate money for the entrepreneurial development fund. I oppose such allocations. Such funds do not work well,” Muhith said.

On the stockmarket, the minister said the government should not intervene much there. The government can only put the policy and regulations in place, he added.

“It is unfortunate that although the stockmarket in Bangladesh began functioning in 1952, the laws for this important market were made in 2012.”

The government will allocate funds in the next budget to open 495 new tax offices at the upazila level to collect more taxes, said Muhith. A total of 86 upazila level tax offices are operating across the country now.

The government has no plan to open a banking commission, as a committee is already working on the cyber heist of the central bank money, he added.

The government might introduce a financial reporting council in the next budget, Muhith said.

Mahbub Ahmed, senior secretary to the finance ministry, said the flow of investment has increased, but not to the expected levels.

Nojibur Rahman, chairman of the National Board of Revenue, said he will hold talks with economic reporters so that more specific proposals from the journalists can be accommodated.

Saif Islam Dilal, president of the ERF, said Bangladesh has more than five crore working people. “So the government should allocate funds for human resources development.”

Quamrul Islam Chowdhury, general secretary of the National Press Club, said economic growth has been hovering around 6 percent for many years now. “We should take this growth to 9-10 percent.”

He also urged the government to increase state investment so that the private sector entrepreneurs also feel encouraged to do the same.

“The government should reduce the prices of petroleum products in line with international prices,” he added.

Sultan Mahmud, the immediate past president of the ERF, urged the government to take steps to stop capital flight from the country.