Why poverty increasing in country

For more than three years, people’s real income has failed to keep pace with the high inflation gripping the domestic economy. As a result, households across all classes and professions are under pressure. The lower-income groups and those on fixed salaries are especially hard hit. People with fixed incomes cannot increase their earnings, no matter how much they wish to. Those holding some power or resources are relatively better off, but the majority of ordinary citizens are in severe distress. Those reliant on others have little to no opportunity to increase their income.

For example, a rickshaw owner can raise fares under the pretext of inflation. When the rickshaw owner increases fares, the rickshaw puller can pass on the cost to passengers. Yet, passengers cannot raise their own earnings to match this increase. They are forced to pay more just to reach their destinations.

However, the passenger must reach the destination even if it means walking. In other words, those whose capacity to provide services is limited may see a slight increase in income, but this is not possible for everyone. Consequently, poor households and those on fixed incomes must reduce household spending to manage daily life.

Many families who were once considered middle class now live in extreme vulnerability. Middle-class people cannot openly share their struggles. Salaried employees on fixed incomes are particularly exposed. The wages and allowances they receive are insufficient to cover household expenses, yet they must maintain a certain social status externally. Employees in state institutions are forced to curtail household spending. Those who earn beyond their official salary, sometimes through illicit means, are in a different situation.

A common misconception exists that low-paid officials resort to corruption out of necessity. This is not entirely true. Some individuals are habitually drawn to corruption—they will engage in it regardless of circumstances. In today’s society, most people, apart from the corrupt, face financial hardship. The well-being of corrupt individuals may be questioned, yet on the surface, they appear comfortable. Many believe money is the source of life’s energy; some openly declare, “Money is the second god.” In today’s society, money dominates. Talent alone cannot secure social standing without financial resources. Still, it is reassuring that some people strive to live honestly.

Despite claims by previous governments of remarkable success in reducing poverty, the reality is that the number of poor is rising. High inflation forces low-income families to cut back on their standard of living. Some manage household expenses by taking loans. The Bangladesh Bank reports that cash in hand seems to be increasing. In reality, people are not holding more cash—they are withdrawing savings from banks to meet daily needs, which gives the impression of increased cash in hand.

Private research organisation, Power and Participation Research Centre (PPRC), has found that poverty in the country has increased. The overall poverty rate now stands at 27.93 percent, meaning one in three people lives below the poverty line. Extreme poverty affects 9.35 percent of the population.

Many others live just above the poverty line, and even a minor economic shock could push them below it. This rising trend is deeply concerning. Three years ago, the poverty rate was lower: in 2022, 18.7 percent of people lived below the poverty line, with extreme poverty at 5.6 percent. Around 18 percent lived just above the poverty line, vulnerable to minor setbacks. PPRC conducted this survey among 33,207 members of 8,067 households nationwide.

The study noted that in 2025, the national average monthly household income was Tk 32,685—Tk 40,578 in urban areas and Tk 29,205 in rural areas. Average monthly household expenditure was Tk 32,615 nationally, and Tk 27,162 in rural areas. More than 55 percent of total income is spent on food. On average, a family spends BDT 10,614 per month on food alone.

For over two years, inflation has remained above 10 percent. In July of the previous year, food inflation reached 14 percent—the highest in a decade. Food price inflation is a critical factor in determining household financial health. The rate of disguised unemployment is rising; nearly 38 percent of the workforce lacks full employment.

PPRC further observed that over the past three years, monthly incomes in urban households have declined, while expenditures have risen. This has worsened poverty levels. Even families that were once relatively well-off now risk slipping below the poverty line. The study revealed that 80 percent of households cannot meet monthly expenses from their earnings alone. The bottom 40 percent of households earn, on average, Tk 14,881 per month, while their monthly expenditure is Tk 17,387.

The middle 40 percent earn Tk 28,818 monthly but spend Tk 29,727. Some 52 percent of families borrow in some form to meet financial needs. The wealthiest 20 percent are relatively secure, earning Tk 78,503 per month and spending Tk 70,770.

High inflation over the past three years has eroded the real income of most families. Income growth has lagged behind rising prices. In November 2024, average inflation was 11.38 percent, while wage growth was only 8.10 percent. In December, inflation was 10.89 percent, with wages increasing 8.14 percent. Due to sluggish wage growth compared to inflation, families struggle to meet household expenses.

To curb inflation, Bangladesh Bank repeatedly raised the policy rate—from 5 percent to 10 percent, affecting short-term loans to scheduled banks. However, this measure has had unintended consequences: private sector credit has declined, investment has slowed, and employment opportunities have contracted. Unemployment among the highly educated has risen eightfold over 13 years—from 4.9 percent in 2010 to 31.5 percent in 2023.

Bangladesh is currently experiencing a demographic dividend, but it is already diminishing. A demographic dividend occurs when more than two-thirds of the population is aged 15–64, with a relatively small dependent population (0–14 years and 65+). In 2023, 65.8 percent of the population fell into the 15–64 age group, down from 66.19 percent in 2019. Experts warn that the country is failing to leverage the benefits of this dividend. They suggest that by prioritising technical education and raising the proportion of technically skilled workers to 60 percent, the culture of unemployment could be overcome.

For the past three years, real income has been falling, worsening the financial position of most households. Some families are just above the poverty line, vulnerable to any financial shock. In 2024, average inflation was 10.89 percent, while wage growth was 8.14 percent. Most households are struggling as wage growth lags behind inflation. Immediate measures are required to reverse this trend.

MA Khalek: Retired General Manager, Bangladesh Development Bank PLC, and writer on economics