More people will fall into poverty
A recent analysis by think tank Centre for Policy Dialogue (CPD) has highlighted the formidable challenges that lie ahead for the country: combatting the realities of more people falling into poverty and greater income inequality. Income inequality, in fact, may reach an all time high this year, with a revenue shortfall of Tk 125,000 crore and a rise in poverty to 35 percent. This must be addressed through careful budget management with an emphasis on fiscal policy that addresses the extraordinary shocks on marginalised groups caused by the pandemic.
The pandemic has completely disrupted economic activities, resulting in a drastic fall in incomes for the extreme poor, moderately poor and even those in the middle income category. Thus a very large section of the population is facing financial hardships that are likely to continue for a while. CPD has rightly pointed out that at this time, there should be less concentration on GDP growth, which is inevitably going to take a hard hit, and a greater focus on saving lives.
We think that CPD's recommendations on combatting income inequality by primarily targeting marginalised groups should be seriously considered. One of the biggest concerns is the inevitable revenue shortfall. Thus, overall fiscal management must be geared towards realistic revenue mobilisation targets. This includes raising tax-free income threshold levels (so that people with lowered income levels are not further burdened) and reducing import-related tariffs on essential foods (to ensure food security of low income groups). The think tank has also recommended, among other things, better utilisation of project aid in the upcoming fiscal years, harnessing all potential sources of foreign finance, greater budget allocation for the agriculture sector, continuing support to the garment and other export sectors, fast-tracking ongoing priority projects, gradually depreciating the Taka (which will attract more remittances and boost exports) and putting a stop to ways to whiten black money, which discourages honest taxpayers while encouraging tax evaders.
The government efforts to alleviate the sufferings of the poor and marginalised groups have been seriously compromised by weak administrative capacity and a lack of good governance. The government must make sure that the upcoming budget is cost effective, with resources being properly ultilised by diverting them from relatively lower priority areas to those that will help to create and maintain employment, improve consumption, provide food security and ease the extreme financial hardships of ordinary people resulting from this crisis.
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