INFLATION AND THE ADEQUACY OF SOCIAL PROTECTION CASH TRANSFERS IN BANGLADESH: A POLICY ANALYSIS OF BENEFIT VALUES AND INDEXATION OPTIONS

Social allowances are effective in protecting vulnerable groups only if they are kept in line with consumer prices. The Old Age Allowance and Allowance for Widow and Husband-Deserted Destitute Women are fixed amounts, adjusted rarely in Bangladesh. This study examines the impact of inflation and periodic revisions on the real value and poverty-line adequacy of these allowances, and estimates the fiscal consequences of applying a rule-based indexation. The real-value measurement, adequacy ratios, counterfactual indexation, and fiscal sensitivity analysis were used to analyze the official program records, budget documents, consumer price indices, and poverty lines from the Household Income and Expenditure Survey 2022 for FY2009-10 to FY2025-26. The nominal allowances grew by 116.7%, and the consumer prices grew by 204.3%, resulting in real values being 28.8% below the baseline. Each benefit was 13.0% of the national upper poverty line in 2022. The lagged full indexation would have cost BDT 8,918 crore in additional direct transfers over sixteen years, which is 16.5% more than the actual transfer. Rule-based reviews protect purchasing power, but decisions on benefit levels are necessary to ensure the benefits are adequate.