Sri Lanka: Strengthening Social Protection

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

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

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

4. Individual (Idiosyncratic) Community (Aggregate/ Covariate) 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 Labour market constraints Aggregate shocks: droughts, disasters, conflict Risks

5. Individual (Idiosyncratic) Community (Aggregate/ Covariate) 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 Ageing: Over next 25 years, share of popn > 60 will double from 1 in 10 to 1 in 5 Risks

6. Children Working age adults Elderly In large families Disabled Out of school (2%) Street children Soldiers (1,284 btwn 9-17 yrs) Malnourished In informal sector, remote/risk-prone/infrastructure-poor areas Unemployed low income Displaced 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 Vulnerable groups/individuals

7. Existing social safety nets

8. Issues • Targeting, benefit and work incentives of Samurdhi programme could be improved • Disability programme does not reach all poor disabled • Social welfare and care services exist but provide limited coverage • 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

9. Issues with Samurdhi: Targeting • Evidence of mis-targeting. • Outcome similar to untargeted programmes such as Primary Health Care or Education • 41% of population received the benefit in 2002 • 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 23% of poorest quintile and 27% of next quintile of elderly • Targeting errors systematic • ethnicity, party affiliation, NIC holding related to probability of Samurdhi receipt. • Mistargeting at local level, not in central level allocations to districts • Lack of rigorous criteria to establish eligibility

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

11. Issues with income support for disabled • 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 • Expenditure rising, possibility of collusion and moral hazard increasing • Integration of disabled into society (education and employment) needed

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

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

14. 4 key areas: Address chronic poverty Help the poor escape poverty Address individual vulnerability Address aggregate vulnerability Target assistance better and reduce work disincentives Safety “ropes”—educn. & empl. Strengthening social welfare and care services Scale up response to aggregated vulnerability Policy Directions

15. Address chronic poverty Help the poor escape poverty Address individual vulnerability Address aggregate vulnerability Improve targeting of programme with PMT, introduce exit/incentive policies 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 Policy Directions

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

17. Address chronic poverty Help the poor escape poverty Address individual vulnerability Address aggregate vulnerability 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 Policy Directions

18. Address chronic poverty Help the poor escape poverty Address individual 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 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) Policy Directions

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

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