South Asian Network on Economic Modeling (SANEM) organized a programme to disseminate the results of their recently undertaken survey titled “Effects of Inflation on the Livelihoods of Poor Households in Bangladesh”. After conducting the nation-wide survey during 9 – 18 March 2023, the programme was held on 29 March 2023 at BRAC Centre Inn, Dhaka and over Zoom. The keynote presentation was delivered by Dr Selim Raihan, Professor of Economics at the University of Dhaka and Executive Director at SANEM. Dr Sayema Haque Bidisha, Professor of Economics at the University of Dhaka and Research Director at SANEM, delivered the concluding remarks. Researchers from SANEM attended the programme as panellists. In order to facilitate participation, the programme was streamed live on SANEM’s Facebook page.

Dr Raihan commenced his presentation with the connotation that the findings of this survey, despite being already evident to the mass people, have important policy implications. Inflation has been exhibiting an upward trend for the past one year. It has risen up to an approximation of 9 to 10 percent in certain months, and the estimates of non-governmental organisations suggest that the rates can be even higher than what is being reported. Escalated prices of necessary commodities in the global market, shortage of domestic production, supply-side disruptions, imperfections in the local markets, and depreciation of domestic currency can be distinguished as reasons for this soaring inflation in recent months. Needless to say, inflation acts as a cruel regressive tax instrument that disproportionately affects the low-income households, creating an enormous pressure on this particular demographic. With that in the backdrop, Dr Raihan outlined the objectives of this study. It aimed to investigate the effect of inflation on the livelihoods of poorer households in Bangladesh, alongside assessing the coping strategies and future outlooks of these people.

For this study, a survey was conducted on 1600 households across 8 divisions. Half of these were selected from urban slums while the other half was selected from rural areas. A detailed scrutiny of the household characteristics confirms the representativeness of the sample. 56 percent of the respondents were household head themselves, while 30 percent of them were the spouse of the head. 90 percent of the household heads were found to be male, which is consistent with the findings of usual national surveys. Likewise, in coherence with the national demographic distribution, approximately 88 and 12 percent of the households were Muslim and Hindu respectively, while a very small faction comprised other religious communities. In terms of education, around 35 percent of the household heads were illiterate whereas approximately 28 percent of them received primary education. Main occupation of the household head included but was not limited to small business owner (17 percent), rickshaw-puller (11 percent), non-agricultural day labourer (10 percent) and farmer (9 percent). This essentially exhibits that these people are truly susceptible to the risks of inflation due to their professional vulnerability.

Dr Raihan then proceeded to discuss the results of this survey. It can be observed that in terms of average household income, no significant changes were reported. This could be due to the fact that six months is too short a period for changes in income to occur. However, average household expenditure faced an approximate increase of 13 percent on a national level, with the costs being marginally higher in the urban area. This can be attributed to the increased food expenditure, which is as high as 19 percent in the urban areas and 15 percent in the rural areas, amounting to a national average of 17 percent. Contrarily, rise in non-food expenditure has been comparatively lower, with an approximate increment of 6 percent on a national level and a 3 percent increase in the urban areas. However, in rural areas, such expenditure has risen by almost 9 percent.

It should be noted that despite price hike, these households have a ceiling over expenditure, which is determined by their income. This essentially means that in the process of adjusting to inflation, many were forced to alter their consumption and savings behaviour. Their major coping strategies included changing food habits (90 percent), borrowing (74 percent), reducing non-food expenditure (56 percent), erosion of saving opportunity (56 percent), working overtime (39 percent), relying on aid (35 percent), using savings (35 percent) etc. Incidentally, urban population are more inclined to change food habits or reduce non-food expenditure, which implies that these strategies vary by location. In terms of borrowing, almost half of the respondents decided to borrow from microcredit organisations, while around 37 percent chose their families and friends as lenders.

Upon juxtaposing the current quantity of food consumption with that of six months prior to this survey, it has been found that around 77 to 97 percent households have reduced their protein consumption, while 37 to 45 percent have decreased the consumption of necessary food such as rice and lentil. In addition to that, they are compromising with the food quality by switching to inferior goods. Both of these tendencies are more noticeable among the urban households, which can be due to the increased food price expenditure in urban areas. Furthermore, poorer households are consuming “special food items” such as Beef, Hilsha, Egg less frequently per month. Average frequency of chicken consumption has fallen to 2 from 4 times per month.

In terms of non-food spending, 92 percent of the households have reduced their clothing expenditure. Additionally, a significant share of households has declined their expenditures regarding health (61 percent), utility services (58 percent) and children’s education (45 percent). However, reduction in non-food expenditure is higher among the rural households than their urban counterparts.

Food and Agricultural Organisation (FAO) of the United Nations has formulated an index to asses people’s hunger experience, which is widely known as the Food Insecurity Experience Scale (FIES). The questions associated with this index were used to evaluate the degree of food insecurity among the survey respondents. Six months prior to this survey, approximately half of these households were food insecure in the sense that they were worried about not having enough food, could not afford healthy food and ate less or only few kinds of food. However, in recent times, around three-fourth of the households have become food insecure in these dimensions. In the span of six months, share of households that had to skip a meal, ran out of food or did not eat despite hunger have increased from one-fifth to two-fifth. Number of respondents reporting that they had to starve a whole day due to lack of money has increased from 10 percent to 18 percent. In consequence to all these, share of food secure and mildly insecure households have reduced from 29 percent to 8 percent and 41 to 33 percent respectively. One-fourth of the households are currently severely food insecure, which was around 12 percent previously. Number of moderately insecure respondents have increased from 18 to an approximate of 34 percent. In general, food insecurity is higher in the urban areas. Around 31 percent of the urban respondents are severely food insecure, while the share is around one-fifth in its rural counterpart.

Two-fifth of the households are part of social security programmes, 29 percent of whom are beneficiaries of Open Market Sales (OMS). This coverage by Trading Corporation of Bangladesh (TCB) is wider in the urban areas. 93 percent of the recipient households receive TCB products once a month, while half of the non-recipients are trying to acquire TCB facilities. However, around 30 percent of the beneficiaries report that these products can be consumed over the duration of 14 to 17 days, while a similar faction reports a period of 10 to 13 days.

Among the future coping strategies, the following steps were mentioned – more borrowing (85 percent), involving non-earning members in paid labour (53 percent), wanting unconditional help (41 percent), discontinuing child’s education (24 percent) etc. One-fourth of the respondents claimed that they have no options left. Around 13 percent of the households are potential migrants, 44 percent of whom want to migrate from urban to rural areas whereas the share of rural to urban migrants is likely to be 36 percent. In terms of future outlook, more than half of the respondents are pessimistic about expecting improvement in their financial conditions. Around 26 percent believe that the status quo will be perpetuated, while 18 percent expect the situation to improve. Approximately 78 percent of the households identified the government measures regarding inflation to be insufficient, while 6 percent thought otherwise.

Upon recognizing inflation as the cruellest “tax” on the marginalized population, Dr Raihan concluded his presentation with some policy suggestions. Substantial amount of domestic production and imports are required to ensure adequate supply of food in the market. In order to combat the prevailing food insecurity among the poorer households, prices of food items need to be reduced through social protection and food support programmes. Market monitoring needs to be strengthened to prevent the manipulation of commodity prices. Under-allocation of resources, targeting errors, lack of coordination between ministries, corruption and institutional weakness are some of the major problems in the social protection sector, which should be addressed accordingly.

In her concluding remarks, Dr Bidisha talked about the long-run implications of coping strategies such as borrowing. For instance, 45 percent of the borrowers are resorting to the microcredit organisations. However, the effective rate of interest in these organisations is very high which can exacerbate the financial vulnerability of the borrowers. Subsequently, she discussed the lack of insurance services in the country and its impacts on the health sector. Many poorer households are being forced to sell their assets in order to access healthcare, she added. Lastly, she differentiated this survey from the existing poverty measurement studies on the ground that the latter only computes the calorie intake without taking the quality of consumption into account. An analysis of food insecurity, on the other hand, provides a comprehensive picture of hunger and malnutrition.

Presentation Link:

http://sanemnet.org/wp-content/uploads/2023/03/PPT_SANEM_HH_Survey_290323.pdf