Photo: Collected
Almost 5 lakh people likely fell into extreme poverty in Bangladesh between the fiscal years 2022-23 and 2023-2024 due to the erosion of purchasing power, said the World Bank.
"Weak private consumption growth and high inflation have halted poverty reduction. Higher food prices particularly impacted poor households, which allocate over half of their budget towards food expenditures," it said.
PPP is a measure that compares the relative value of currencies by examining the prices of a fixed basket of goods and services in different countries. About 8.4 lakh people are projected to join the ranks of the moderately poor, who earn $3.65 a day in purchasing power parity (PPP), said the bank.
According to the definition of World Bank extreme poverty is based on an international poverty income of $2.15 a day. Bangladesh's extreme poverty rate is forecasted to rise to 5.1 percent in FY24 from 4.9 percent the previous year.
The rate of moderate poverty is also expected to increase to 29.4 percent at the end of FY24, which was 29.3 percent a year ago.
"Elevated inflation will put pressure on consumption, while forex rationing will constrain private investment," the report states.
The WB's estimate of extreme poverty closely aligns with the estimates of the Bangladesh Bureau of Statistics (BBS), which states that the ratio of the extremely poor is 5.6 percent.
The BBS's estimate of moderately poor people was 18.7 percent in 2022.
Forex rationing restricted imports, leading to electricity blackouts. Rising financial sector vulnerabilities have dampened growth prospects.
However, job quality deteriorated between 2016 and 2022 as the percentage of employees earning more than $3.65 a day fell from 77.9 percent to 50.2 percent.
"On the supply side, industrial growth moderated as energy shortages and import restrictions offset steady external demand for RMG. The services sector slowed as domestic purchasing power declined, while agricultural growth remained modest."
"This has impacted labour income, especially for vulnerable populations working in services and agriculture."
Inflation remained elevated in the first half of FY24, declining marginally to 9.7 percent in February 2024, driven by rising food and electricity prices.
Messenger/Mumu
