Bangladesh: Not on Track to Achieving MDG's Without Debt Relief
Razu Ahmed
June 27, 2008 Bangladesh has made remarkable progress in terms of economic growth and yearly per capita income.
Per capita GNI recently crossed the USD $500 mark and is forecasted to continue to rise. Growth has stabilized at just over six per cent in the last two years. Gross domestic product has risen to nearly USD $68 billion, while exports have grown almost 30 times from a paltry $348.42 million in 1972-73 to over $10 billion in recent years (Bangladesh Economic Survey: 2007).
With strong economic growth, gradual but palpable industrialization in rural areas, and steady accumulation of business capital, Bangladesh looks to be a booming emerging economy. Goldman Sachs in 2005 picked Bangladesh as one of the ‘next 11’ economies that would emerge in the next few decades, when China, India, and Brazil will have made their place among the five largest of the world.
Bangladesh has sustained positive growth rates and seen poverty reduced significantly over the past decade. However, although the proportion of people living in poverty has decreased by almost 7% during the last 15 years (SUPRO: 2007), half of its population still lives on less than $1 a day, and 83% on less than $2 a day. 20 million people, or over seven percent of the population, are categorized by the United Nations Development Programme as "extremely poor" for living on less than 16p a day (DFID: 2007).
Additionally, while the percentage of people living in poverty has decreased, the total number of poor people has increased. Between 1991 and 2005, the number of people in extreme poverty has increased to more than 4.4 million. From 2000 to 2005, the number of people living on less than 16p a day has increased to almost 3 million (Bangladesh Bureau of Statistics: 2005).
Inequality and disparity are seen pervasive; the top 5% receives 30% of national income; the poorest 5% receives 0.67% (Unnayan Onneshan: 2005). According to the latest household income expenditure survey, about 40 percent of Bangladesh’s 140 million people are below the poverty line, according to the ‘cost of basic needs’ method.
It is often stated that although the proportion of poor is decreasing the absolute number of poor are on the rise across the world. About a fourth of the population of Bangladesh is considered "extremely impoverished", devoting nearly all of their daily income to food consumption.
The most recent global yardstick of ‘a dollar a day’ is therefore misleading - the World Development Report 2007, published annually by the World Bank in Geneva, states that the percentage of Bangladesh's population earning less than a dollar a day was 36 per cent in 2000. A recent study (April 2008) showed that the number of people living below the poverty line was on the rise due to exorbitant increases in food prices. The number currently stands at 90 million, up from previously estimated 60 million - or 40 per cent of the country’s population. At least 40 million people of the country are currently facing extreme poverty without work and sub-standard purchasing power with their current incomes.
The Bangladeshi government defines that the people with daily food intake of less than 2122 kilo-calories techincally live below the poverty line. "At least 60 per cent of the country’s population currently consumes much less," said Harun KM Yusuf, professor of Biochemistry and Human Nutrition at Dhaka University. "The high prices of food commodities are forcing the poor to cut nutrition intake." Yusuf showed that by spending one taka on coarse rice, a consumer consumed only 120 kilo calories in December 2007, which was 50 calories less than what he or she consumed in January 2006 for the same amount of money (The New Age: 27 April 2008).
As a low-income LDC, Bangladesh is at a crossroad when it comes to achieving the UN Millennium Development Goals - eight comprehensive social and economic milestones member states of the United Nations agreed to reach by 2015. Proponents of neo-liberal economics often advocate and propagate that economic growth is the ultimate tool to development, but they do not mention that this growth and prosperity must be equitable. Even the much-hyped and glorified MDGs that have of late become the ultimate measure for development (though they require the economy to grow at a stable seven per cent) do not address the issue of equity. Economic and social inequality is manifested in form of denial of access to basic services, such as education, health, and water-sanitation, and poor public expenditure on these essential services runs the risk of failing to reach the MDGs by the 2015 deadline.
The overall development strategy of Bangladesh, outlined in the Poverty Reduction Strategy Paper “Unlocking the Potential: National Strategy for Accelerated Poverty Reduction” has been prepared in light of reaching the Millennium Development Goals. Improvement of the quality of life of the people occupies the central position of all eight MDG targets. Although the government of Bangladesh is quite hopeful of realizing the goals by the stipulated time-frame, the issue of financing has become a grave concern. Moreover, the gradual withdrawal of the state from providing essential goods and services has become one of the tenets of aid “conditionalities” imposed by the International Financial Institutions (IFIs), including the World Bank, the International Monetary Fund, and the Asian Development Bank. It is not difficult to understand that the imposed agenda gives comfort to the so-called donor community as it ensures sustained flow of repayment of their loans, thereby reducing the pressure on government revenue. As a result, public expenditure on essential services is being squeezed day by day putting poor people at the mercy of private sector as the process involves privatizing the basic services.
The burden of public debt, both external and internal, has become a serious concern for Bangladesh, as it takes away a substantial part of public expenditure that could be invested in basic human services such as health, education etc. Currently, the government of Bangladesh spends more on external debt servicing than on health care. On an average, for every dollar in grant aid received, the government of Bangladesh pays back 1.5 dollar in external debt repayment. Bangladesh desperately needs its external debt cancelled. To finance the MDGs, every year a staggering $7.5 billion in external budget support is needed which is almost four times the amount of aid/loans currently provided by the international donor community. The present development context looks bizarre- a dollar paid in debt service seem to be a dollar lost for the MDGs.
(This article is a research report, jointly prepared by Monowar Mostofa And Razu Ahmed)
Tags: External Debt , Bangladesh , Essential Services
