Safety Nets in South Asia Addressing Chronic Poverty and Coping with Shocks

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Safety Nets in South AsiaAddressing Chronic
Poverty and Coping with Shocks
Mansoora Rashid Sector Manager, Social
Protection South Asia Region
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What Are Safety Nets?

• Public programs that re-distribute resources
  to the poor to promote equity/growth
• Unconditional Transfers
• In Kind Transfers (Food, etc)
• Cash Transfers
• Conditional Cash Transfers
• Cash for Work Programs (Work fare) (also an ALMP)
• CCTs for Education and Health

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1. Great Strides in Reducing Poverty

• South Asia has realized 5.5 growth over past
  15-20 years
• Significant reduction in the poverty and set to
  halve poverty by 2015
• (MDG)

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But Gains Compromised by Shocks
Food prices, but also natural/agro-climactic
disasters, conflicts
SAR is A Disaster Prone Region) 1990-2005
Between 120-500 natural disasters Highest
Incidence IN, BD, PK, AF
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2. Who Is Impacted?

• Mostly the poor, those with few assets, are often
  the hardest hit.
• Overall, though, who is impacted depends on the
  type of shock. For example
• Natural Disasters Geographic areas are affected
• Food Price Increase More complicated
• Net Consumer/Producer
• Regional Impact
• Inter-temporal Impact.

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3. How Do Households Cope?

• Formal Instruments
• Existing public safety nets are used in some
  countries where they are reasonably well
  developed and can be extended (e.g. Bangladesh,
  Eastern Europe, Latin America)
• New-Temporary safety nets for often used in
  countries where safety nets are not effective
  e.g. cash transfers for Earthquake victims
  (Pakistan) and Tsunami victims (Sri Lanka,
  Maldives).

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Coping? Contd.

• Formal Instruments (contd)
• New-Permanent Safety Net Programs sometimes
  proposed or created to protect the poor (e.g.
  against seasonality in wages like NREG, India)
• Subsidies For food price shocks, Governments
  sometimes subsidize prices and ration supplies of
  the main staple crop

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Coping? Contd.

• Informal Arrangements
• Poor households adjust by scaling down
  consumption (quantity and quality), withdrawing
  children from school, and increasing labor supply
  (including of children)
• Non-Poor adjust by selling physical assets and
  borrowing.

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Risk Coping Strategies in Sri Lanka
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4. What are the problems?

• Household poor risk management strategies lead to
  disinvestment in human capital, loss of
  productive assets? reducing welfare and
  compromising growth

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Problems? (contd)

• Government subsidies/controls create food market
  distortions, are expensive, and are sticky
  often politically very difficult to remove.
  (e.g. wheat subsidy Pakistan)
• Public safety net programs are less distortionary
  but lack coverage, (mainly rural not urban) ,
  fragmented, poorly administered, and not geared
  to respond to shocks. Food Based safety nets
  suffer considerable leakage from high costs of
  procuring, storing and distributing food.

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Programs are Not Well Targeted

• India 60 percent of public spending on PDS in
  India is received by the non-poor,
• In Pakistan, 25 percent of Food Support Program
  expenditures accrue to non-poor households
• In Sri Lanka, 40 percent of safety net spending
  is mis-targeted to the top 40 percent of the
  population
• Program Spending ranges from 1-2 of GDP

Bangladesh Targeting of the Primary Education
Stipend Program ( Recipients/Non-Recipients)
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A Multitude of (Small) Programs, Overlapping
Mandates
Country Employment Based Employment Based Employment Based Safety Nets Safety Nets Safety Nets Safety Nets Social Security Social Security Social Security
Country EmploymentProtectio (legislation, unions, collective bargaining Micro Credit Training Public Works/ Work- fare Education (school meals, stipends) Cash/ Food Social Pension (y) Health Based Civil. service pensions Private Pensions, Insurance Informal Social security, Micro-insurance
India x x x x x X (y) x x x
Pakistan x x x x x x x x
Bhutan x x
Sri Lanka x x x x x x x x x
Maldives x x x
Nepal x x x x x X (y) x
Afghanistan x x x x x x
Bangladesh x x x x x X (y) x x x x
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Problems (contd)

• Large new safety net programs developed and
  scaled up quickly also have major implementation
  issues, no different than existing public
  programs. Some of those proposed are very costly
  and also very difficult to remove once in place.
• Temporary safety nets can help, but they are also
  difficult to administer and target, often do not
  have sunset clauses, and create new entrenched
  bureaucracies

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5. What Can Be Done?

• Short term Use non-distortionary policies such
  as scaling up existing safety net programs (even
  if not perfect), or, where limited, adding new
  cash transfer programs with clear sunset
  clauses In this case, important to implement by
  strengthening capacity of existing programs (not
  creating new establishments).
• Medium to Long Term Create (or develop as
  needed) fiscally sustainable and more effective
  safety net programs improve their
  administration, delivery, targeting. (Continue
  shift from food to cash). Also improve their
  flexibility for scale up in times of disasters.

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6. Is This Feasible?

• Bangladesh is strengthening its safety nets.
  Improving program coverage (to urban areas),
  targeting and administration of cash transfer
  programs, and adding co-responsibility
  incentives for families to send children for
  health care and education
• Pakistan is also improving program administration
  and piloting a conditional cash transfer program
• Aside from this region, Eastern Europe and Latin
  American countries have reformed their safety net
  programs, with reforms well underway in Middle
  East and East Asia