Yanchun Zhang/AI. BlateauUNDP

Mitigating Vulnerabilities & Promoting Resilient Growth

Sequencing, Cost-Efficiency and Fiscal-Sustainability of Social Protection – Policy Dialogue

Seoul, Korea, 1 November 2012

Sequencing, Cost-Efficiency and Fiscal-Sustainability of Social Protection:

An Overview  

Outline

I. Motivation

II. Sequencing

III. Cost Efficiency

IV. Fiscal Sustainability

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I. Motivation

SP is increasingly recognized for its productive role;

Faster economic growth in developing countries makes social protection more affordable;

Many questions remain to be answered to link theory to practice.

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II. Sequencing of SP

SP Arrangements

Informal SP: family/kinship

Semi-formal SP: CSOs, NGOs, mutual aid arrangements

Formal SP: public, private, hybrid

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Informal-Semiformal SP arrangements limitations

Inadequate protection : potential collapse; too small payouts

May exclude poorest or discriminate certain social groups

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Triggers

Internal triggers: Change of political or economic context within the country Rapid economic and income growth Democratization Post-conflict

External triggers Economic crises Climate change

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III. Cost-Efficiency of SP

Cost-Benefit Analysis

Cost-efficiency vs. cost-effectiveness

Direct and indirect costs

Direct and indirect benefits

Cost benefit analysis

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Costing Tools

ILO (2008): 7 sub-Saharan African countries, 5 Asian countries

HelpAge International (2011): 50 low- and middle-income countries

WHO (2010): 49 low-income countries Save the Children (2009): 57 developing

countries UNICEF and ODI (2009): 5 West African

countries

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SPF Costing Tool and RAP

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Benefits

Brazil’s Bolsa Família

South Africa’s grant (including the old-age pension, disability grant and child support grant)

India’s Mahatma Gandhi National Rural Employment Guarantee Act

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IV. Fiscal-Sustainability of SP

Fiscal Space and Fiscal Sustainability

A fiscally sustainable social protection system is the one that does not undermine a government’s overall fiscal position and underlying trends in the medium- and long-term.

Fiscal space is the available budget room that a government can use to spend on a desired purpose

Fiscal space and fiscal sustainability are two related concepts.

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A Dynamic and Comprehensive Framework

A dynamic approach is needed because many types of social protection expenditures require not only some budgetary room today but also the availability of future budgetary resources.

A comprehensive approach is needed because fiscal space created for social protection may immediately or ultimately crowd out spending on other programmes.

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Practice of Social Protection Fiscal Sustainability Analysis

Viet Nam

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Create Fiscal Space

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El Salvador

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Mozambique

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Thailand

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Financing options

Economic growth leading to Increasing tax revenues Improving revenue collection Reallocating expenditures Increasing spending efficiencies & reducing leakages Introducing innovative financing mechanisms Increased aid & transfers Borrowing Debt restructuring

Key factor : political will

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Conclusion

Connecting the dots between vulnerability assessment, costing exercise, fiscal space evaluation and benefits simulation.

Embedding SP in a national development strategy Public support; Political will; Public-private partnerships; Scaling up formal SP while engaging existing schemes.

The government needs to play the leading role to set the legislative and regulatory framework for other SP providers to thrive and to contribute to more equal societies, more security for people, more stable and inclusive growth.

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