News Analysis: What may cash aid actually mean?

As Bangladesh approaches the February general election, political parties are once again centring their campaign promises on the household ledger.

According to a government survey, average household expenditure reached Tk 31,500 per month in 2022, nearly double the level seen in 2016.

In urban areas, the burden is significantly higher, averaging Tk 41,424, while rural households spend roughly Tk 26,842. Taken together, families appear caught in a quiet “consumption trap”.

Worse still, stubborn inflation has effectively vaporised the savings of low-income households, leaving millions balanced on a financial knife-edge.

The BNP has responded with a “social policy agenda”, including “family cards” designed to bypass traditional, leaky distribution channels.

Meanwhile, Jamaat-e-Islami, the BNP’s principal electoral rival, has proposed a “smart social security card” and a Qard-e-Hasana scheme, offering interest-free loans of Tk 10,000 per month to five lakh unemployed graduates for up to two years.

For the next elected government, the gamble is twofold: finding the fiscal space to fund such transfers without triggering an inflationary spiral, and ensuring the money actually reaches the pockets it is intended to save.

The BNP’s plan proposes monthly cash transfers of Tk 2,000 to Tk 2,500 to 50 lakh women.

While the amount represents about 6 percent of average urban household spending, for the rural poor it would account for roughly 9 percent.

However, economists are questioning the fiscal and operational realism of the proposal.

The primary objective of such cash support is survival, said Zahid Hussain, former lead economist at the World Bank’s Dhaka office.

“This is just to meet the bare minimum -- basically staying alive and keeping people away from a crisis,” he said.

He argued that the proliferation of welfare cards lacks a “scientific approach”.

Hussain said policymakers must first calculate the precise financial requirement to bridge the “poverty gap” for the most vulnerable.

His estimates suggest that addressing the poverty gap would require around Tk 6,000 crore annually. Once administrative costs and leakages are added, the total could rise to Tk 10,000 crore.

Even then, the programme would remain “financially affordable” for the state -- provided it does not cannibalise long-term development spending on health and education.

The dilemma becomes starker when viewed alongside other major fiscal proposals.

A pay commission recommendation to raise salaries for government employees by as much as 142 percent would, if fully implemented, add an estimated Tk 1.06 lakh crore a year to the budget.

The state already spends about Tk 1.31 lakh crore on salaries and pensions; the proposal would effectively double the public-sector wage bill.

Such an expansion would place severe strain on public finances and risk fuelling inflation -- disproportionately hurting the very groups social protection programmes are meant to shield.

The BNP’s broader roadmap also includes “farmer cards” to provide digital identities and “seasonal credit”, aimed at reducing dependence on middlemen.

Although Jamaat has yet to unveil detailed welfare plans, the deeper anxiety surrounding social safety nets is less about the availability of funds, but more about the mechanism of delivery.

Bangladesh’s history with social protection is riddled with “inclusion and exclusion errors” -- a polite term for patronage and graft.

Prof AK Enamul Haque, director general of the Bangladesh Institute of Development Studies, said social safety nets suffer from longstanding structural flaws.

“The right people often don’t receive the benefits. It’s not just that. Sometimes one person gets support while another, who should, gets nothing. In past regimes, we faced these issues,” he said.

Haque noted that even attempts to modernise delivery through digital payments have failed to resolve these problems.

“Our governments have tried digital payments, but the problems remained unresolved,” he said, adding that accurate physical delivery to the right people remains crucial.

Without a clear plan to prevent political interference, these proposed family or social welfare cards risk becoming another set of symbolic gestures.

“The key point is that it must not follow political patterns; it should actually reach the intended beneficiaries,” he said.

There are at least two challenges ahead: support must be sufficient -- far exceeding the current Tk 600–850 monthly payments for the elderly and people with disabilities -- and it must be designed to avoid work disincentives or political patronage.

“Both parties need to pay attention to this,” Haque said.