Even higher growth unlikely to end extreme poverty fully

Dhaka,  Tue,  26 September 2017
Published : 23 Mar 2017, 00:17:43

Even higher growth unlikely to end extreme poverty fully

SANEM expresses doubt over achieving poverty-related SDGs
FE Report

Bangladesh would not be able to fully eliminate poverty by 2030 even with a 9.0 per cent annual GDP growth, a leading regional economic think tank has said.

Even in a high growth situation, the rate of extreme poverty would be no less than 4.0 per cent by the year 2030, South Asian Network for Economic Modelling (SANEM) said in its quarterly economic review released Wednesday.   

In such a scenario, the country would not be able to meet one of the major global targets of the Sustainable Development Goals (SDGs) within the stipulated period, it added.

"Our research suggests that even with a 9.0 per cent GDP growth, the rate of extreme poverty will be around 4 per cent by 2030," SANEM director Professor Dr. Selim Raihan told the reporters in the capital.  

"At the same time, reducing the current poverty rate by half with a GDP growth of 9.0 per cent seems highly unlikely," he added.

According to the SDGs, the extreme poverty needs to be eliminated by 2030 and the poverty rate has to be halved.

The rate of extreme poverty in Bangladesh at present would be 12.9 per cent and the poverty rate 23.2 per cent while the country's average GDP growth rate over the last five years would be around 6.5 per cent.

Providing a comparative scenario of the current baseline and the SDGs, SANEM researchers showed that Bangladesh has a long way to go in achieving many other goals like good health, quality education, affordable and clean energy, and reduced inequality.    

To address the situation, the think tank has called for making the upcoming national budgets more consistent with the SDGs.

"A SDG Monitoring section has to be introduced in the budget," Dr. Raihan recommended, focusing on the ways of making the budget more aligned with the SDGs.

He pointed out that 65 per cent (on average) of the ministry-wise spending would be currently aligned with the SDGs and said the ministry budgets should be further aligned with the goals. "Each ministry has to prepare a SDG-budget."

The SANEM director also proposed to increase the public expenditure on education as percentage of GDP from present 1.9 per cent to 3.0 per cent by 2020 and 4.0 per cent by 2025.

"At the same time, public expenditure on health should also be increased from its current level of less than 1.0 per cent to 2.0 per cent by 2020, to 3.0 per cent by 2025 and to 4.0 per cent by 2030," he added.

The SANEM also called for preparing a roadmap for developing 100 special economic zones (SEZs) by 2030 and suggested introducing a regular updating mechanism on the progress of the SEZs.     

It also noted that while the share of private investment in GDP has remained static in the country over the years, its share in total investment has fallen.

Even under a very optimistic scenario, it added, the investment-GDP ratio has to be increased annually by 0.98 per cent from the present rate of 0.28 per cent. It called for raising the ratio of infrastructure investment to GDP from the present 1.6 per cent to at least 5.0 per cent.

SANEM also identified delays in implementation of the critical projects, institutional inefficiency, rent seeking and political uncertainty as major detriments to accelerating investment in the country.

Focusing on the financial sector, it said that mere lowering of the interest rate would not be enough for expansion of the private sector credit due to having numerous other challenges to the business environment, which needs to be addressed.

Underlining the need for increasing the country's tax-GDP ratio, the think tank stressed the need for strong political commitment to simplify the tax systems, strengthen the tax administration and broaden the tax base under a wider reform agenda.

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