Bangladesh is facing a surge in commodity and medical expenses, leading to concerns for the middle class. Experts recommend prioritising public welfare, including healthcare, education, and food security, over economic growth to address this issue. Investing in public welfare can help alleviate poverty, expand healthcare access, and create opportunities for marginalised communities. It is crucial to control food inflation, especially during times of rising demand, SM TANJIL UL HAQUE writes in details
Bangladesh is a developing country with a population of over 160 million people. In recent years, the country has achieved significant economic growth. Bangladesh’s impressive economic growth has been widely acknowledged, thanks to the country’s strong demographic dividend, resilient remittance inflows, and stable macroeconomic conditions, among other factors. Even during times of global uncertainty, the country has managed to achieve significant development, including its thriving ready-made garment exports.
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However, the recent surge in commodity prices has been a cause of concern, particularly for the middle-class. In light of this, many experts and economists are now urging the government to shift its focus towards public welfare rather than just economic growth. As a result, some economists argue that focusing on public welfare, such as healthcare, education, and social protection, would better serve the country’s long-term development goals than only focusing on solely on development.
WHY FOCUS ON PUBLIC WELFARE?
Economic growth is essential for any country’s development, but it should not come at the cost of public welfare. The primary goal of any government should be to provide its citizens with a decent standard of living. The focus should be on improving the lives of the people, especially the marginalized sections of society. Bangladesh has made significant progress in reducing poverty, but there is still a long way to go. Investing in public welfare, such as education, healthcare, and social safety nets, can have a significant impact on people’s lives. It can help reduce poverty, increase access to healthcare, and provide opportunities for the marginalized sections of society. These investments can also help reduce income inequality and promote inclusive growth.
“Food inflation has reached an alarming level. The government needs to take urgent measures to control the situation, as it has serious implications for public food security and the livelihoods of low-income households.”
During Ramadan, while people fast, the market showed its wrath through yet another spell of price hike of essential commodities. This trend operates irrespective of the global economic crisis. Market players take advantage of the higher demand for a few commodities after the month. However, inflationary pressure has continued to prevail for several months now. Globally, what had started with the supply shortages and logistical constraints during Covid pandemic has now become a new normal during the ongoing Russia-Ukraine war. In August 2022, the inflation rate reached 9.5 percent, the highest in several years. Till January 2023, the inflation rate was on a declining trend but has now increased again.
According to the Bangladesh Bureau of Statistics (BBS), inflation increased to 8.78 percent in February 2023 from 8.57 percent in January 2023. The import ban on many items, in view of depleting foreign exchange reserves, has also added to inflationary pressures. During July-January of FY 2022-23, import growth was negative, resulting in some improvement in our current account deficit. Still, import restrictions are hampering businesses due to their raw material needs. For low income earners, high prices of essential commodities have led to a significant reduction in their purchasing power. There has not been an increase in wages to match the price hikes. So, people are struggling to manage daily necessities for their families. Middle-income households are forced to cut down on many expenses and make significant lifestyle adjustments as they feel the pinch of the increased costs of living.
Given the challenges that people in the country are facing, focusing on public welfare is more important than ever. Investments in education, healthcare, and most importantly food safety nets can help reduce poverty and provide opportunities for marginalised sections of society. Additionally, the high prices of essential commodities are making it difficult for low-income earners to make ends meet, and there has not been an increase in wages to match the price hikes. Middleincome households are also feeling the effects of the increased costs of living.
The government must prioritise public welfare and invest in it to ensure the well-being of its citizens. It is time to shift the focus from just economic growth to public welfare. Addressing the ongoing inflationary pressure requires careful and coordinated measures that combine fiscal and monetary policies. However, there has not been much change in policies, resulting in limited success in containing inflation.
FOOD INFLATION: A MATTER OF CONCERN!
Inflation in Bangladesh has hit a seven-month high of 9.33% in March, with food prices surging, taking a toll on low-income households. The increase in Consumer Price Index (CPI) was led by the rise in prices of petroleum, gas, and electricity, primarily due to higher commodity prices in global markets. Food inflation rose by 96 basis points to 9.09% in March, with pent-up demand during Ramadan leading to a surge in demand for food. In contrast, non-food inflation fell to 9.72%. The World Bank has stated that pent-up demand and a surge in the price of imported goods have intensified inflationary pressure on non-food items like pharmaceuticals, clothing, furniture, and house rent.
These factors make it necessary to focus on public food security and curb food inflation. In a survey of 1,600 families, conducted by the South Asian Network on Economic Modelling (SANEM), it was revealed that the food habits of 90% of the families had changed due to the increase in food expenditure. The survey also found that 73% of the families were concerned about having enough food in their homes between September 2022 to February 2023, and the number of families who had no food at least for a day increased during the period.
The higher inflation for an extended period would push many into acute food insecurity. Therefore, it is imperative for the Bangladesh government to take measures to curb food inflation, especially in times of increasing demand, to maintain public food security. Dr Selim Raihan, Executive Director of the SANEM, stated in a recent interview, “Food inflation has reached an alarming level. The government needs to take urgent measures to control the situation, as it has serious implications for public food security and the livelihoods of low-income households.”
The Bangladesh government can take several measures to control food inflation, such as enhancing market monitoring, introducing an efficient supply chain mechanism, and increasing agricultural productivity. The government could also ensure that import policies are conducive to maintaining the food supply chain. It is necessary to focus on stabilizing the prices of essentials like rice, oil, sugar, and eggs, which have experienced disproportionate price hikes. Bangladesh Bank (BB) has raised policy rates multiple times in recent months to combat higher consumer prices. However, the World Bank has suggested that monetary policy needs to be dedicated to reining in inflation through interest rate channels.
They suggest introducing a benchmark lending rate or reference rate for commercial banks could provide a transition path from rate caps towards market-determined rates. The BB is already working to put in place a benchmark lending rate, which is expected to be effective in July. It is high time to employ interest rates as a decisive tool to combat inflation. In conclusion, Bangladesh needs to address the issue of food inflation to mitigate the impact on low-income households and maintain food security in the country.
In an article published in the Financial Express, Dr Ahsan H Mansur, Executive Director of the Policy Research Institute of Bangladesh, suggested that interest rates should be used as a decisive tool to combat inflation. He said, “It is high time to employ interest rates as a decisive tool to combat inflation. The central bank needs to raise policy rates to tame inflation, as well as introduce a benchmark lending rate or reference rate for commercial banks to provide a transition path from rate caps towards market-determined rates.”
OVERBURDENED HEALTH SECTOR CONTRIBUTING TO NATION’S FINANCIAL WOES?
To rub salt in the wounds, healthcare sector is also trembling, with people struggling to afford even basic medical care. The escalating prices of healthcare services are not only caused by the lack of investment in the health sector but also the crumbling state of the healthcare system. Bangladeshis, particularly those in the lowerincome brackets, face enormous difficulties in accessing healthcare services due to the overburdened and understaffed public hospitals and upazila health complexes. Consequently, people are forced to seek healthcare in private clinics and hospitals and bear exorbitant bills that often lead to selling assets or borrowing money.
Moreover, the out-of-pocket-spending (OOPS) for healthcare in Bangladesh is 73.9 percent, which is higher than other South Asian countries such as Nepal, India, Pakistan, Sri Lanka, and Bhutan. This alarming situation shows that the government has done little to invest in primary healthcare, which is a fundamental element of a country’s social development. The situation is further exacerbated by overburdened and understaffed public hospitals, under-resourced upazila health complexes, and non-existent emergency care facilities in remote areas, leading to avoidable deaths, especially of expectant mothers.
As a result, people are forced to seek healthcare in private clinics and hospitals and have to pay exorbitant bills, often by selling assets or borrowing money. From 2000 to 2017, the OOPS more than quadrupled, according to the WB study. This means that people are spending a significant amount of their income on healthcare, leading to a decline in their overall standard of living.
Thus, the government must prioritise investing in the healthcare system rather than embarking on huge, costly, infrastructural projects. Furthermore, according to a report published by the Health Economics Unit of the health ministry, the government expenditure on medical purposes is decreasing every year, while that of individuals is increasing steadily. The report also revealed that individuals bear 64%, 66%, and 69% of the total expenditure on medical purposes in 2018, 2019, and 2020, respectively.
Higher individual expense than the government means for many the medical expense is disastrous. Many people go below poverty level for this expense.Maya Vandenent
Chief of Health, UNICEF Bangladesh
Commenting on the trend, Dr Bardan Jung Rana, the World Health Organization’s Bangladesh representative, said that the high individual expense is a hindrance to achieving universal health safety. He said, “If 69 per cent of total expense is made at the individual level, then this is a hindrance to achieving universal health safety.” Maya Vandenent, Chief of Health, UNICEF Bangladesh, added that higher individual expenses than the government mean that medical expenses are disastrous for many people. She said, “Higher individual expense than the government means for many the medical expense is disastrous. Many people go below poverty level for this expense.”
The report indicates that the government spent 28% of total expenditure in 2018, 26% in 2019, and 23% in 2020. Subrata Paul, the focal person of Bangladesh Health Accounts cell, presented data at the event, revealing that of the total individual expenses, 54% is spent by the richest people, while the poorest people spend only 4%. Director General of Drug Administration (DGDA), Major General Mohammad Yousuf, stated that many people sell their last resorts, land, or property, for treatment of cancer, kidney disease, or paralysis, and become poorer due to such medical expenses. The experts recommended making emergency medicines readily available to decrease expenses in the sector.
Many people sell their last resorts, land, or property, for treatment of cancer, kidney disease, or paralysis, and become poorer due to such medical expenses.Major General Mohammad Yousuf
Director General of Drug Administration (DGDA)
The government can learn from the success of other countries such as Indonesia, which has implemented a national insurance system to provide basic medical care and facilities to all citizens. Additionally, the government can explore the capitation payment model, where a fixed remuneration is given in advance to healthcare providers for each patient and per unit of time, regardless of the extent or amount of healthcare services the patient avails.
Furthermore, the government should ensure that health facility budgets at upazila health complex facilities and union health and family welfare centres are increased according to the needs of the local population. Access to healthcare is a basic right of all citizens, and the government must ensure that the citizens can exercise this right without facing anymore financial hardship.
To conclude, Bangladesh’s focus on public welfare is critical, especially during these times when the country is facing high inflation and increased costs of living. Investing in public welfare, such as healthcare, education, and social safety nets, can help reduce poverty, increase access to healthcare, and provide opportunities for marginalised sections of society.
The recent surge in commodity prices has been a cause of concern, particularly for the low-income earners and the middleclass. Hence, it is essential to focus on food security and curb food inflation. The government must prioritise public welfare and invest in it to ensure the well-being of its citizens. It is time to shift the focus from just economic growth to public welfare, which can bring about inclusive growth, reduce income inequality, and promote sustainable development in the long run.