After a decade of decline, poverty rising again since 2022: Salehuddin

• Poverty rate rising since 2022 reversal
• Inflation pressures push millions below line
• Weak project execution hampers poverty reduction
• VAT often misses government exchequer

Finance Adviser Salehuddin Ahmed said the poverty rate has been rising since 2022, reversing more than ten years of steady decline.

"Bangladesh has a strong record of poverty reduction, particularly since 2010. But since 2022, we have seen a reversal," he said at an event at Pan Pacific Sonargaon in Dhaka yesterday.

After warnings from international agencies and local think tanks in recent months, the government has now publicly acknowledged that the number of people living in poverty is growing.

A World Bank report last month projected that the poverty rate in Bangladesh will rise to 21.2 percent in 2025, up from 20.5 percent the previous year. The bank estimated that more than 30 lakh people fell into poverty in 2024, a sign that the economy is losing its ability to shield vulnerable populations from economic shocks.

In August, the Power and Participation Research Centre, a policy think tank, reported that the poverty rate had surged to 27.93 percent from 18.7 percent in 2022.

In 2016, the Bangladesh Bureau of Statistics (BBS) estimated the poverty rate at 24.3 percent.

At the event, organised by the Social Development Foundation (SDF), an autonomous organisation under the Financial Institution Division, Ahmed said poverty has two dimensions.

He described these as material poverty and poverty of the mind. Material poverty, he said, reflects present conditions, while the second dimension relates to the process of improvement.

"With such a large population, addressing both simultaneously is a major challenge, and progress naturally takes time. Without setbacks, the reduction would have been greater," he added.

He said inadequate implementation of poverty reduction projects remains a key weakness.

"Our programme designs are strong, but execution is poor due to incompetence, perceived corruption, and slow laws and procedures," he said.

Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development, said the pace of poverty reduction, while impressive over several decades, has slowed in recent years.

Razzaque said persistent inflationary pressure is expected to have pushed millions back below the poverty line.

"In this context, directly targeted, community-driven, externally financed anti-poverty interventions have significant potential to serve as an important complementary instrument within the development policy toolkit," he said.

A mid-term review of the SDF project titled "Resilience, Entrepreneurship and Livelihood Improvement Project" was presented at the event.

According to the report, around 37 percent of beneficiaries achieved at least a 30 percent rise in income, and roughly 38 percent moved out of poverty.

'VAT MISSES STATE COFFERS'

In a separate development, the adviser yesterday said value-added tax (VAT) does not always reach public coffers even though consumers pay it when purchasing goods or receiving services.

He made the remarks while speaking as the chief guest at a seminar marking "VAT Day" at the National Board of Revenue (NBR) headquarters in Dhaka.

"It is unfortunate and reflects a persistent weakness in the VAT system," Ahmed said. "One key aspect of VAT is that the system must be very simple, with no scope for manipulation. If you or I pay VAT, it must reach the government exchequer."

Highlighting consumer behaviour, he noted that in many countries, there is no escape from VAT. "However, in Bangladesh, many consumers look for shops that do not charge VAT, which reinforces noncompliance among businesses," he said.

"I have seen many people, even relatives, ask, 'Does this shop have VAT?' If the answer is yes, they immediately look for another shop. If a businessperson says they will not charge VAT, people accept it. This mentality must change," he added, stressing that taxpayers should be assured of receiving services in return for what they pay.

NBR Chairman Md Abdur Rahman Khan presided over the event.

The finance adviser also cited international examples, saying, "In some countries, the tax-to-GDP ratio is 26 percent. So why do people pay? Because they are convinced the money will not be siphoned abroad and will be used properly. From the government's side, we must guarantee service delivery."

He recalled his experience in India, where a pharmacy refused to sell medicines without issuing a proper cash memo, despite the process being time-consuming, because accountability was culturally expected. "These practices have to grow in our society," he said.

Speaking at the seminar, NBR Chairman Khan said VAT is widely misunderstood in Bangladesh, as many businesses believe they are the ones paying it. In reality, firms merely collect VAT from consumers and deposit it with the government.

"They pay income tax, but VAT is not their tax. The same is true for import duties; these costs ultimately fall on the public," he explained.

He added that the existing VAT system has become unnecessarily complicated and needs simplification, particularly to help businesses properly understand and use the VAT credit system.

Khan also cautioned officials against penalising businesses for minor mistakes, saying such actions would be like "slaughtering the goose that lays the golden eggs."

Other speakers at the seminar included Md Khairuzzaman Mozumder, secretary to the Finance Division; Md Shahriar Kader Siddiky, secretary to the Economic Relations Division; Nazma Mobarek, secretary to the Financial Institutions Division; Yasir Azman, vice-president of the Foreign Investors' Chamber of Commerce & Industry (FICCI); Mahbubur Rahman, president of the International Chamber of Commerce (ICC) Bangladesh; and Zaidi Sattar, chairman of the Policy Research Institute.

Syed Mushfequr Rahman, member (VAT Audit) of the NBR, and Md Azizur Rahman, member (VAT Policy), among others, were also present.