Social safety nets are non-contributory transfer programs to safeguard the disadvantageous groups of people who are vulnerable to shocks and poverty. The safety net transfer includes cash transfers (also conditional transfers), food-based programs, in-kind transfers, public works, price subsidies, etc. These programs can be provided by the public sector such as the State and aid donors and by private sectors, which include non-government organizations (NGOs) and private firms.
Located in a seismically-active zone, Nepal is a high-risk country, which is highly prone to earthquakes and environmental hazards. This has created a likelihood of problems cropping up that would severely affect sustainable development. Recently, Nepal has been experiencing the impact of climate change especially in the agricultural sector with productivity declining. Food Outlook, a bi-annual commodity publication of the Food And Agricultural Organization had reported: “If the current price volatility and liquidity conditions prevail in 2008/09, plantings and output could be affected to such an extent that a new price surge might take place in 2009/10, unleashing even more severe food crises than those experienced recently.”
The prediction came true. As Nepal’s rain-fed agriculture suffered weird and dry monsoon during the year 2009/10, the current rise in food price can be expected to further widen inequality. It has been increasingly realized that the government has to play a key role in the time of contingencies, shocks and difficult economic situations to protect the vulnerable groups from adverse effects of such conditions.
Nepal’s social safety nets program remains quite unsatisfactory because of the stark dichotomy between development approaches. For instance, consider a few questions for policy consideration: Should all scarce resources be allocated so as to maximize economic growth, the benefits of which will eventually trickle down to the poor, or should a part of these resources be transferred to the poor to improve and maintain their living standards during the process of economic growth? A third option is to give the poor access to assets (such as land) that provide them with a source of economic growth based on their absolute advantage ie, labor. The policy choice depends on country-specific constraints and opportunities.
There is clearly an acute need to protect the chronically poor by introducing social assistance programs or restructuring existing ones in ways that make them fiscally, politically, and administratively sustainable.
Generally, safety nets transfers include: Cash transfers; food-based programs such as supplementary feeding programs and food stamps, vouchers, and coupons; in-kind transfers such as school supplies and uniforms. Theoretically, cash transfers are preferred to in-kind transfers for minimizing distortions in the economy, but if the objective is to encourage the consumption of a particular commodity and if there are political objectives that are better served through in-kind transfers, then it is preferable. In addition, in-kind transfers, hold their real value during inflationary period.
If safety net programs are properly chosen and designed, they can complement economic growth; otherwise they crowd out growth-promoting investments and private safety nets. Thus, it is important to relate program choice to desired objectives and the nature of poverty, with a clear understanding of the potential constraints and trade-offs. For example, in countries with a high incidence of rural poverty where it is difficult to separate needy from non-needy households, cash transfers will not be feasible in terms of targeting and fiscal sustainability.
The economic crisis and the adjustment mechanism that has followed will have long-term effects on the living standards of the vulnerable groups. The shrinking budgets are severely restricting the amount of resources available for social assistance. Low wage rates and rising unemployment has further aggravated poor’s livelihood. There is clearly an acute need to protect the chronically poor by introducing social assistance programs or restructuring existing ones in ways that make them fiscally, politically, and administratively sustainable.
Social inclusion and targeted programs was an instrument in the Tenth Plan. The aim was to bring about positive changes in the overall human development indicators as well. Especially after the peace accord with Maoists in 2006, poverty alleviation programs have been integrated in the political agenda of the leading political parties. Unfortunately, there is no sign that the initiatives have brought about a better life for the poor people. Therefore, considering the results from targeted programs in the past and non-performing projects in recent years, it can safely be said that public programs have failed to help increase productivity and economic opportunities for the poor. Social investment policy does not seem to be developing human resources either.
The coverage and quality of social protection initiatives are constrained by inadequate information on fiscal sustainability, poor and non-operative regulatory framework, the absence of well-developed targeting methodologies, as well as administrative capacity of the delivery system. To enhance the program’s long-term benefits for the poor, it is preferable to choose assets that have high long-term employment multiplier effects. The proportion of leakage is higher under price subsidies and quantity rationing, modest under food stamps, and lowest under programs involving food with work requirements. Thus, it is better to implement such programs in order to benefit the vulnerable groups.
For instance, before executing energy subsidies program, there are a few cross-cutting issues that have to be considered. The benefits to the poor from energy price subsidies depends on the poor’s share of energy expenditures, the responsiveness of energy demand to prices and the possibility of replacing subsidized fuel with non-subsidized fuels. If this is not done, the targeted groups are devoid of the intended benefits.
There is a difference between feeling safe and secure, and having security. Many times, the state creates an environment through policy announcements that makes people feel more secure but security apparatus does not improve. I hope Nepal’s social security system does not just make people feel secure but provides security in reality.
bishwambher@yahoo.com
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