Social budgeting for poverty reduction

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Social budgeting for poverty reduction

• Krzysztof Hagemejer
• SOC/FAS

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Summary

• Social budgeting methodology developed by
  SOC/FAS is a tool which can help to assess
  affordability of different social transfer
  options in addressing poverty and vulnerability.

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Social budgetingfinancing social protection
nowand in the future

• Where resources come from and how they are spent?
• Existing schemes what resources are needed to
  sustain these?
• Planned or reformed schemes how much will it
  cost in the short, medium and long term?

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Case of AfricaniaMost vulnerable groups

• Poverty Assessment study revealed that among the
  most vulnerable are
• Orphans and working children
• Disabled, living with long illness
• Elderly

Available informal social protection arrangements
often fail, formal social protection arrangements
are not present or insufficient
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Social protection in Africania

• One has to assess effectiveness of exisiting
  schemes
• Who benefits and how many (poor- non poor,
  vulnerable groups, gender)?
• What are the benefits (amount)?
• What are the impacts?
• Who pays (source of financing) and how much (how
  much for benefits, how much for administration)?

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Existing formal social protection arrangements in
Africania

• Free basic education access, supply, quality
  problems
• Health care services with different access
  possibilities for different groups to different
  services
• Social insurance type provisions (with a limited
  scope) for employees in the formal sector
  government employees, private sector workers,
  parastatals
• 27 various social protection schemes
• Community-based health insurance schemes and
  community-based welfare schemes?
• Other?

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What are the resources currently being allocated
to all the existing social protection programmes
and what are financing sources?

• Primary education 2.6 of GDP
• Health care spending 2.6 of GDP
• Formal social secuirty 1.0 of GDP
• 27 social protection programmes - ?
• Other
  - ?
• Total social protection 6.5 of GDP
• More than half of health care spending comes from
  donor contributions, as well as majority of
  financing of small scale social protection
  programmes directed at the poor

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What is the potential fiscal space for new social
protection transfer programmes in shorter run?,
in medium term?

• Total government expenditure stands at about 20
  of GDP, while revenue at about 12 of GDP. The
  difference is filled mainly by grants and other
  foreign assistance
• About 25 of the total public expenditure (about
  4.5 of GDP) is spent on what is defined as
  poverty reducing expenditure (nearly 80 of this
  expenditure goes to basic education and primary
  health care). There is a visible increasing trend
  of this share.
• Using poverty headcounts and poverty gap
  estimates from 2000/2001 HBS , one can estimate
  that aggregate poverty gap is in the range of
  1.5 of GDP for the food poverty line and 4.5 of
  GDP for the basic needs poverty line.

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Universal pension for Africania? 1

• According to the last census 1.35 million persons
  over 65 live in Africania about 95 of them do
  not have access to other formal forms of old age
  security and most of them live in poverty.
• Assume that the official poverty line of would be
  an appropriate level of income support for that
  group, and that the aim of a universal pension
  would be to close the poverty gap for the elderly
  poor
• Annual benefit cost (without costs of
  administration - which might be significant!)
  will be 1.3 of GDP and about 7 of the total
  governments spending (but nearly 11 of the
  total revenue from taxes).

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Universal pension for Africania? 2

• This appears infeasible at first sight but a
  closer social budget analysis would reveal
• -          which other government expenditure for
  old age security and poverty relief could be
  substituted by such a measure,
• -          how the cost could develop over time
  given alternative demographic projections and
  economic scenarios,
• -          how the expenditure- given alternative
  economic growth paths could be progressively
  integrated into government budget ,
• which alternative financing tools could help to
  re-finance the newly incurred social expenditure
  (new universal social security tax phase in
  gradually to replace temporary donor financing?

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Work in progress

• Modelling costs of basic social protection in
  selected African countries
• basic education for children age 5-14
• basic health care for all
• universal pension for everybody over 65
• Macroeconomic and fiscal policy assumptions
• Two scenarios

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