What lies ahead for the poor as allowance remains unchanged?

The ultra-poor who are enrolled in the government's social safety programme will see no increase in their allowances in the upcoming fiscal year amid soaring commodity prices.

However, the budget announced today proposed to add around 10 lakh new beneficiaries under social security. This includes 3.34 lakh people with disability, 2 lakh elderly, and 2 lakh widows.

Besides, the budget proposed raising the monthly stipend for students at the higher secondary level from Tk900 to Tk1,050.

There will be no increase in the allowance for any other beneficiary under the social security net.

Also, the budget for the open market sale (OMS) programme, which sells essentials at subsidised rates, has been reduced to Tk2,004 crore from the outgoing fiscal's revised budget of Tk5,491 crore.

State Minister for Commerce Ahsanul Islam Titu recently announced plans to increase the sale of products at subsidised prices, but the finance minister did not address this in his budget speech.

Experts warned that financially struggling groups, including the disabled, elderly citizens, widows, destitute tea workers, and members of marginalised communities, will face a heavier financial burden in the next fiscal year.

The government last increased allowances for the elderly and widows by Tk50-Tk100 before the FY24 national election. They currently receive Tk600 and Tk550 per month, respectively.

Since then, the prices of daily commodities have risen by around 10%, and the finance ministry projects a 6.5% increase in inflation for the upcoming financial year, but their allowances remain unchanged.

If the current commodity prices listed on the Trading Corporation of Bangladesh (TCB) is analysed, it shows the allowance money is used up to buy 3-4kg of coarse rice and one egg.

Overall, the allocation for social security will rise by Tk9,754 crore to Tk1,36,026 crore in the next fiscal year. Most of this increase will go towards pensions for government employees, with expenditure rising by Tk9,727 crore to Tk36,580 crore.

Mahbub Ahmed, former senior secretary at the Finance Division, told The Business Standard that after the allowances were raised last year, there has been a significant inflation and there is no indication that it will decrease. 

"Therefore, without increasing the allowances of social safety net beneficiaries, it will be challenging for the very poor to manage their expenses," he added.

He noted that when education and medical expenses go up, it hits the poor the hardest. "As a result, children from poor families might stop going to school, and many won't seek medical help unless they're very sick. This means they end up spending less on education and health to afford food."

Health burden on poor

From the next fiscal year, referral hospitals, where many people from various socio-economic backgrounds seek medical care, will face a significant increase in equipment import duty from 1% to 10%. 

This change may lead to higher medical expenses for the poor, lower class, lower-middle class, and middle class, experts said.

The World Trade Organization recommends spending 5% of GDP on health. However, developed countries spend as much as 8%. 

However, the expenditure on health is less than 1% for next fiscal. This year also the allocation for the health sector is being increased by only Tk3,357 crore.

Out-of-pocket expenditure in Bangladesh is already 67%, although the government plans to reduce it to 30% by 2032.

Meanwhile, the National Board of Revenue has proposed to double the tax rate on interest on deposits of schools, colleges and universities including MPOs in the next financial year. 

Due to this, the cost of education of students is likely to increase. Overall, Tk5,392 crore allocation is increasing in the education sector.