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In Search of a Self-reliant Poverty Reduction Policy for Bangladesh

Md Abdul Wadud
Professor
Rajshahi University, Bangladesh

Abstract/ Executive Summary:

This paper examines the question of whether with a heavy burden of debt on its shoulder it is possible to embark on an effective and self-reliant programme of poverty alleviation for Bangladesh. This is done by looking into the dynamic debt burden of Bangladesh, comparing the debt service payments with poverty reduction funding and then confronting the question of ownership of the poverty reduction strategy, that is, whether it is internally or externally funded.

Keywords: Self-Reliant Policy, Poverty, Reduction Policy, Bangladesh

Location: In Bangladesh

Start Date:

End Date:

Program Area: Socio-economic and Policy

Commodity: Poverty

Objectives:

To identify the Self-Reliant Poverty Reduction Policy for Bangladesh

Methodology:

Bangladesh is a heavily debt-ridden country. Data on various aspects of the external debt of Bangladesh. Total external debt of Bangladesh which stood at 3,083 million U.S. dollars in 1978, rose to 5,651 million after five years in 1983. This trend continued and external debt outstanding amounted to 10,692 million in 1988. After another five years in 1993, the amount stood at 14,650 million. Then it fell to 14,033 million in 1998. By the year 2002, the figure rose to 16,276 million dollars. Debt service payment stood at 145.9 million U.S. dollars in 1978 and it rose to 910.1 million in 2002. This means that Bangladesh paid about Tk 52,267 million taka in 2002 as debt service. This is a huge amounts. foreseeable future. For estimating dynamic burden, Domar’s famous debt burden model is used here. We first describe the model and then use real data to estimate the dynamic burden for Bangladesh. paid from tax revenue then that can constitute a burden on the public. According to Domar (1944), the burden of public debt should be measured by the ratio of the additional tax and national income. Domar argued that if income grew then an absolute increase in tax might not inflict any hardship on the public. What matters is an increase in the tax-income ratio. implement the ADP target by 0.73 percent of GDP. Average inflation was also higher for the period as it reached 7.04 percent in contrast to PRSP target of 6.5 percent. Gross domestic investment (24.97%), total revenue (10.78%) and tax revenue (8.69%) all fell short of PRSP targets by 0.03 percent, 0.22 percent and 0.31 percent of GDP respectively. Borrowing from the banking sector was 0.28 payments with respect to PRSP target (0.30 and 0.11 percent, respectively) put pressure on the balance of payments.

Source of Information: Bangladesh Journal of Political Economy Vol. 23, No. 1 & 2

Article Link (Online Journal):

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

So, we have failed in our search for a self-reliant poverty reduction policy and ended up with another grand programme based completely on foreign aid. With yearly debt service payment of around a billion-dollar and total debt outstanding of around 17 billion, how justified is it to undertake a programme of poverty alleviation completely on foreign aid? Will it not accentuate debt service payment problem further, raise the already high level of total debt, and make us increasingly dependent on donors for our economic decision making? Lest we be misunderstood and thought to be unsupportive of poverty alleviation programmes, we make it emphatically clear that not only do we support such policies but think that those should be an integral part of our economic agenda. Where we differ is that in order to be effective, a poverty alleviation programme ought to be self-reliant. Bangladesh’s success in growth of the real sectors has been mostly the result of indigenous effort. If ever an indigenous poverty reduction policy is devised, not as grandiose as the present one fed by foreign aid but much smaller and based on our meagre resources, that day we shall see real poverty alleviation, that day we shall have reasons to feel proud of.

Knowledge Management: Journal