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Home-grown poverty reduction strategy
Shahiduzzaman Khan
10/16/2005
Repeated pressure from the development partners and the desperate need for financial support from the World Bank have prompted the policy planners to submit the much-talked-about Poverty Reduction Strategy Paper (PRSP) document before the Executive Committee on the National Economic Council (ECNEC) today (Sunday) for consideration. The ECNEC is expected to approve the document after a long wait.
The final version of the home-grown PRSP will be released by the end of December this year following the endorsement of the ECNEC. It will serve as a strategic tool for combating the country's pervasive poverty. Planning Commission sources admitted that the government has missed a number of deadlines to finalise the PRSP as desired by the country's top donors. The delay has put a financial burden on the government's coffers.
The three-year strategic document has already been reviewed by the 21-member National Steering Committee on the PRSP headed by principal secretary to the Prime Minister Dr Kamal Uddin Siddiqui. Despite Bangladesh's a sustained 5.5 per cent economic growth in the last decade, poverty remains a nagging problem crippling the country's potentials to move towards a higher growth trajectory. By various estimates, around 48 percent of the population is still living on less than a dollar a day, a benchmark of the United Nations to measure poverty.
The revised PRSP document, which envisages to cut poverty significantly, has further shored up the issues of good governance, corruption and administrative reform as desired by the Local Consultative Groups (LCG), a club of the country's bilateral and multilateral donors. But the final paper has included a new issue -- monitoring the actions relating to the PRSP implementation.
Sources said that the final document has adequately dealt with issues such as tourism, urban poverty, land and the rights of indigenous people in light of inputs from the donor groups. It has also mapped out a comprehensive strategy to fight graft. The General Economics Division (GED) of the Planning Commission would monitor the status of the ultra-poor, the poverty situation and track implementation process in the next three years.
The final PRSP would see an updated medium term macro-economic framework (MTMF) and policy matrices. It has also revised the targets of the economic growth and export taking stock of the situation of the quota-free regime.
However, the authors of the PRSP have defended their paper as a home-grown development document -- one that is destined to reduce poverty, generate employment and narrow the growing gap between the rich and the poor. The authors, mostly economists and secretaries of the government, defended their conservative growth projection of the economy, saying a lot of uncertainties remains on the way to accelerated growth.
The quota phase-out of textiles poses a lot of uncertainties. That's why the authors gave a single digit growth projection for the export in the next three years, beginning from FY05. Economists associated with the PRSP formulation said they laid thrust on the pro-poor growth, boosting critical sectors, building safety nets for affected people and ensuring social developments in framing up the document.
The PRSP contains time-bound action plans and various reforms measures. It seeks to attack poverty on five different fronts. According to its authors, adequate thrust was given to agriculture and rural non-farm sectors as the main areas for employment generation and poverty reduction. About a million people join the workforce every year. As such, emphasis has to be given to the sectors that can create jobs in huge numbers.
Defending the conservative growth projection of the GDP by FY07, the authors of the PRSP said Bangladesh can halve its poverty by 2015 as per the Millennium Development Goals (MDGs), even if the country enjoys 6.5 per cent growth in next 10 years. The donor agencies have estimated that if the country wants to halve the number of poor people by 2015, its GDP needs to grow by 7.0 per cent annually in next ten years. The final document targeted the areas where poverty gap is very small. As such, if the country can maintain a 6.5 per cent growth a year up to 2017, it can easily achieve the MDGs.
Economists said the PRSP has targeted a private sector-led growth so that investment is made in the country efficiently. Good governance is one of the four supporting strategies in the PRSP as the success of the PRSP will largely depend on curbing corruption, combating crimes, making the judiciary accessible to the poor and ensuring good-governance through devolution of power to the local administration. In fact, the heart of the PRSP is a policy matrix it has suggested for the next three years.
The matrix sets targets for every sector and specifies the responsibilities of the ministries, divisions and implementing agencies and highlights the priorities for the future. According to the medium-term macro-economic framework, set in the PRSP, the economy will grow at a rate of 5.5, 6.0 and 6.5 per cent between FY05 and FY07.
Inflation will be kept at 6.5, 5.5 and 5.0 per cent in the next three fiscals. Fiscal deficit will be bottled up at 4.5 per cent of the GDP by FY07 while keeping domestic borrowing at 1.9 per cent and external loans and grants at 2.6 per cent of the GDP by FY07. The growth of exports and imports has conservatively been set at 7.0 and 9.5 per cent by FY07 while private credit and broad money will, as a proportion of GDP, be 15.2 per cent and 13.5 per cent respectively by FY07.
Growth is only one element of, what must be, a multi-dimensional poverty reduction strategy that encompasses human development, reduces vulnerability and promotes social inclusion and empowerment as well. But growth has to be the critical element, without which the other elements will not be successful.
However, it has to be noted here that though Bangladesh's economic growth record has been reasonably good, but it is still not sufficient to achieve the country's poverty reduction targets. Moreover, the country's growth has been accompanied by growing inequality that has reduced its poverty reduction impact.
The greatest failure of the document, as envisaged by the country's civil society, is that it reaffirms and rests on the belief that proper macroeconomic policies lead to poverty reduction. The worldwide experience of the past 30 years has shown this to be negative. The assumption of the PRSP is that macro-economic fundamentals lead to strong gross domestic product (GDP) growth which leads to poverty eradication. In a society where large sections of the population live in poverty, such thinking is entirely backwards. Only micro-economic improvements - that is, only better incomes for each individual family - result in broad-based economic progress, which in turn results in broad-based GDP growth.
The civil society groups say the PRSP uses pro-poor rhetoric without proposing any micro-economic strategies which authentically improve the lives of poor people. Macro-economic approaches that ignore micro-economic realities have proved time and again to be pro-rich policies which result in widening inequality, they added.
Against this backdrop, the final PRSP has been fine-tuned to the actual requirements of the country's teeming millions in order to both accelerate growth and make it more pro-poor. A more pro-poor sustainable pattern of growth has the potential to be more equitable. That would be an added long-term benefit to the country's development.
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