1. Sri Lanka: Strengthening Social Protection Coping with Risk: Social Safety Nets Dileni Gunawardena Senior Lecturer Department of Economics & Statistics

2. Overview Risks Risks Vulnerable groups Vulnerable groups Existing social safety net/programmes Existing social safety net/programmes Key issues Key issues Policy directions Policy directions

3. Risks Individual (Idiosyncratic) Individual (Idiosyncratic) Community (Aggregate/ Community (Aggregate/ Covariate) Covariate)

4. Risks Individual (Idiosyncratic) Individual (Idiosyncratic) Community (Aggregate/ Community (Aggregate/ Covariate) Covariate) Sickness, disability or death of family member. Poor are susceptible to Sickness, disability or death of family member. Poor are susceptible to Communicable diseases: respiratory infections, mosquito-borne illnesses Water-borne diseases Non-communicable diseases Cardiovascular, diabetes, tuberculosis Unemployment Unemployment Labour market constraints Aggregate shocks: droughts, disasters, conflict

5. Risks Individual (Idiosyncratic) Individual (Idiosyncratic) Community (Aggregate/ Community (Aggregate/ Covariate) Covariate) Drought, crop failure, other natural disasters Drought, crop failure, other natural disasters Drought most significant (people affected/needed relief). 27 major episodes in 1948-1992 period 24 floods, 17 landslides (Badulla, Ratnapura, Matale, Kegalle, Nuwara Eliya, Kandy, Kalutara), 10 cyclones Conflict-related risks: several hundred thousand displaced Conflict-related risks: several hundred thousand displaced Ageing: Over next 25 years, share of popn > 60 will double from 1 in 10 to 1 in 5 Ageing: Over next 25 years, share of popn > 60 will double from 1 in 10 to 1 in 5

6. Vulnerable groups/individuals Children Children Working age adults Working age adults Elderly Elderly In large families In large families Disabled Disabled Out of school (2%) Out of school (2%) Street children Street children Soldiers (1,284 btwn 9-17 yrs) Soldiers (1,284 btwn 9-17 yrs) Malnourished Malnourished In informal sector, remote/risk- prone/infrastructure-poor areas In informal sector, remote/risk- prone/infrastructure-poor areas Unemployed low income Unemployed low income Displaced Displaced Disabled (only 16% work, poor?) Disabled (only 16% work, poor?) Most rely on family support (only 2/3 are happy with this), LFP of >60 fallen, only 16% had planned for old age Most rely on family support (only 2/3 are happy with this), LFP of >60 fallen, only 16% had planned for old age

7. Existing social safety nets Area/Programme Beneficiary group Expenditure Samurdhi programme (income transfers, micro credit, small scale infrastructure, infant milk subsidy) The poor 12,449 mn. (0.62% of GDP) Civil conflict related programmes (payments to disabled soldiers, rehabilitation and reconstruction) Conflict affected population 6,392 mn. (0.32% of GDP) Flood and drought relief Population affected by natural disasters 1,466 mn. (0.07% of GDP) Other (Triposha, MCH/N, disability allowance, assistance for indigent population and disabled) Specific 456 mn. (0.02% of GDP)

8. Key issues/gaps Area/ Programme Key issues/gaps Samurdhi programme Benefits low, impact on welfare minimal Large inclusion and exclusion errors Programme expn. Declined from 0.9% GDP in 2001 to 0.4% in 2004 Civil conflict related programmes Displacement relief (food assistance) does not meet nutritional needs, rehabilitation assistance faces strong fiscal constraints Flood and drought relief Disaster relief covers all, works effectively Other Knowledge gap on effect of current interventions on child malnutrition Less than 50% of disabled receive income transfer from govt. Little integration of disabled into education and jobs Macro Holistic plan to address macro/aggregate vulnerabilities

9. Issues Targeting, benefit and work incentives of Samurdhi programme could be improved Targeting, benefit and work incentives of Samurdhi programme could be improved Disability programme does not reach all poor disabled Disability programme does not reach all poor disabled Social welfare and care services exist but provide limited coverage Social welfare and care services exist but provide limited coverage Relief programmes could be strengthened in their ability to support affected populations. Relief programmes could be strengthened in their ability to support affected populations. Cost of delivery of safety nets likely increased by involvement of many ministries Cost of delivery of safety nets likely increased by involvement of many ministries

10. Issues with Samurdhi: Targeting Evidence of mis-targeting. Evidence of mis-targeting. Outcome similar to untargeted programmes such as Primary Health Care or EducationOutcome similar to untargeted programmes such as Primary Health Care or Education 41% of population received the benefit in 2002 41% of population received the benefit in 2002 44% of HHS in top 3 quintiles of population received Sin 1999/2000 44% of HHS in top 3 quintiles of population received Sin 1999/2000 Only 60 percent of households in bottom quintile rcvd in 1999/2000 Only 60 percent of households in bottom quintile rcvd in 1999/2000 Only 23% of poorest quintile and 27% of next quintile of elderly Only 23% of poorest quintile and 27% of next quintile of elderly Targeting errors systematic Targeting errors systematic ethnicity, party affiliation, NIC holding related to probability of Samurdhi receipt.ethnicity, party affiliation, NIC holding related to probability of Samurdhi receipt. Mistargeting at local level, not in central level allocations to districts Mistargeting at local level, not in central level allocations to districts Lack of rigorous criteria to establish eligibilityLack of rigorous criteria to establish eligibility

11. Figure 5.4: District allocations for Samurdhi Source: Ministry of Samurdhi, Progress Report 2003-2004, CBAR 2002, DCS Poverty indicators/ CEPA 2004

12. Box 1: How much money will it take to move people out of poverty through income transfers? Consumption shortfall of average poor person in 2002 was Rs. 320 per person per month. Consumption shortfall of average poor person in 2002 was Rs. 320 per person per month. 23 percent of Sri Lanka’s population outside North and East poor in 2002; so total income shortfall Rs. 1,227.6 mn. 23 percent of Sri Lanka’s population outside North and East poor in 2002; so total income shortfall Rs. 1,227.6 mn. Assuming a further 10 percent for the North and East, Rs. 1,350 million per month, or 16,204.5 million annually. Assuming a further 10 percent for the North and East, Rs. 1,350 million per month, or 16,204.5 million annually. In 2002 this was In 2002 this was 1.6 times the budget for Samurdhi benefits1.6 times the budget for Samurdhi benefits 4 percent of total government expenditure4 percent of total government expenditure 1 percent of GDP1 percent of GDP With perfect targeting, the budget for Samurdhi could have eradicated poverty among 60 percent of the poor. With perfect targeting, the budget for Samurdhi could have eradicated poverty among 60 percent of the poor.

13. Issues with Samurdhi: Adequacy Level of benefit low Level of benefit low 5-7 days of food per month, at best increased food consumption of 4 lowest deciles by 7 percent5-7 days of food per month, at best increased food consumption of 4 lowest deciles by 7 percent Benefit payments smaller than stipulated grant Benefit payments smaller than stipulated grant because of compulsory savings and social insurance scheme and ¼ amount of average shortfallbecause of compulsory savings and social insurance scheme and ¼ amount of average shortfall Value eroded with time Value eroded with time Worker disincentives possible, though unlikely Worker disincentives possible, though unlikely

14. Issues with income support for disabled Only 41% of disabled (surveyed) receive any sort of income transfer Only 41% of disabled (surveyed) receive any sort of income transfer Main group (92% of transfers, 85% of total budget) is disabled soldiers, others are undercovered Main group (92% of transfers, 85% of total budget) is disabled soldiers, others are undercovered Expenditure rising, possibility of collusion and moral hazard increasing Expenditure rising, possibility of collusion and moral hazard increasing Integration of disabled into society (education and employment) needed Integration of disabled into society (education and employment) needed

15. Issues with Relief Relief (dry rations) for displaced persons (IDPs) insufficient to meet their nutritional needs Relief (dry rations) for displaced persons (IDPs) insufficient to meet their nutritional needs Fiscal restraints limit coverage of provision to permanent resettlers Fiscal restraints limit coverage of provision to permanent resettlers Tsunami-related cash transfers—no errors of exclusion reported, but significant errors of inclusion Tsunami-related cash transfers—no errors of exclusion reported, but significant errors of inclusion Wage rates in workfare were above market Wage rates in workfare were above market

16. Knowledge gaps In understanding/designing of exit conditions (Microfinance/workfare) In understanding/designing of exit conditions (Microfinance/workfare) On effect of current interventions on child malnutrition On effect of current interventions on child malnutrition No evidence on impact of provincial council programmes No evidence on impact of provincial council programmes Little understanding of impact of macro/aggregate shocks on vulnerability Little understanding of impact of macro/aggregate shocks on vulnerability

17. Policy Directions 4 key areas: Address chronic poverty Address chronic poverty Help the poor escape poverty Help the poor escape poverty Address individual vulnerability Address individual vulnerability Address aggregate vulnerability Address aggregate vulnerability Target assistance better and reduce work disincentives Target assistance better and reduce work disincentives Safety “ropes”— educn. & empl. Safety “ropes”— educn. & empl. Strengthening social welfare and care services Strengthening social welfare and care services Scale up response to aggregated vulnerability Scale up response to aggregated vulnerability

18. Policy Directions Address chronic poverty Address chronic poverty Help the poor escape poverty Help the poor escape poverty Address individual vulnerability Address individual vulnerability Address aggregate vulnerability Address aggregate vulnerability Improve targeting of programme with PMT, introduce exit/incentive policies Improve targeting of programme with PMT, introduce exit/incentive policies Increase benefit level (without compromising work incentives and fiscal sustainability Increase benefit level (without compromising work incentives and fiscal sustainability Improve fiscal, administrative and targeting efficiency by consolidation of disability and other cash payments under the Samurdhi programme Improve fiscal, administrative and targeting efficiency by consolidation of disability and other cash payments under the Samurdhi programme

19. Policy Directions Address chronic poverty Address chronic poverty Help the poor escape poverty Help the poor escape poverty Address individual vulnerability Address individual vulnerability Address aggregate vulnerability Address aggregate vulnerability Consider conditional cash transfers to reduce school non- attendance and child malnutrition Consider conditional cash transfers to reduce school non- attendance and child malnutrition Promote access of poor through skill development and access to micro- finance Promote access of poor through skill development and access to micro- finance

20. Policy Directions Address chronic poverty Address chronic poverty Help the poor escape poverty Help the poor escape poverty Address individual vulnerability Address individual vulnerability Address aggregate vulnerability Address aggregate vulnerability Strengthen delivery of social welfare and care services through public-private partnerships Strengthen delivery of social welfare and care services through public-private partnerships Implement national disability policy focusing on raising awareness/reducing stigma, preventing disability, and including disabled people in socio- economic activity Implement national disability policy focusing on raising awareness/reducing stigma, preventing disability, and including disabled people in socio- economic activity

21. Policy Directions Address chronic poverty Address chronic poverty Help the poor escape poverty Help the poor escape poverty Address individual vulnerability Address individual vulnerability Address aggregate vulnerability Address aggregate vulnerability Develop a package of interventions: cash/livelihood grants, workfare and social welfare and care services, to be scaled up in case of disasters Develop a package of interventions: cash/livelihood grants, workfare and social welfare and care services, to be scaled up in case of disasters Strengthen relief for conflict affected groups Strengthen relief for conflict affected groups Reintegration of demobilised soldiers Attend to special needs of children and youth Rehabilitation of schools, roads, essential infrastructure (public works)

22. Samurdhi Reform and the Welfare Benefits Act No. 24 of 2002 Main thrust of the act is to Main thrust of the act is to Limit programme to bottom 25-27 percent of population (900,000 hhs)Limit programme to bottom 25-27 percent of population (900,000 hhs) Better accuracy in identifying poorBetter accuracy in identifying poor Making transfer more progressiveMaking transfer more progressive Eligibility Eligibility PMTF, eligibility checked every 1-3 yrsPMTF, eligibility checked every 1-3 yrs All homeless hhs (1.3% of applicants) includedAll homeless hhs (1.3% of applicants) included Exit mechanism to be devisedExit mechanism to be devised Benefit Benefit Variable component for children and agedVariable component for children and aged Rs. 830 per hh, up from Rs. 320 per hhRs. 830 per hh, up from Rs. 320 per hh De-linked from saving and insuranceDe-linked from saving and insurance

23. Safety Ropes: suggestions Conditional cash transfers Conditional cash transfers Targeted to 5-6 year olds and 11-14 year oldsTargeted to 5-6 year olds and 11-14 year olds Microfinance for the poor Microfinance for the poor Strengthen regulatory framework to ensure security of deposits and probity of microfinance organisationsStrengthen regulatory framework to ensure security of deposits and probity of microfinance organisations Knowledge gap: impact of microfinance on poverty (poorest)? What works best?Knowledge gap: impact of microfinance on poverty (poorest)? What works best? Combine with workfare?Combine with workfare?