Social Safety Nets as Sri Lanka Seeks Economic Recovery

Posted by on June 30, 2022  /  0 Comments

LIRNEasia’s Chair Prof. Rohan Samarajiva along with Senior Research Manager Gayani Hurulle participated as panelists in the press conference presenting the Common Minimum Program for Economic Recovery held on 21st of June at BMICH. This panel discussion was organized by the National Movement of Social Justice (NMSJ) with the aim of presenting a set of actionable reforms that could be implemented with minimum acceptance from most of parties that presented manifestoes for economic recovery. Members of the Panel also included Mr. Murtaza Jafferjee, Chair of Advocata Institute and Dhananath Fernando, CEO of Advocata Institute.

Gayani drew on LIRNEasia’s research to take a deep dive into social safety nets, a key component of the Common Minimum Program. She introduced the key tenets of social safety programs and translated them into the Sri Lankan context. Some key takeaways from her presentation are listed below.

The importance of recognizing social safety nets as an absolute priority cannot be overstated at this time of soaring inflation and record unemployment. While in 2019 close to 3 million individuals or 15% of the population were falling below the poverty line, this figure has currently almost doubled according to the UN, with increasing amounts of people forced to live in destitution.

Existing Social Safety Nets in Sri Lanka

Cash transfers are suitable in this context, as it is an easy to implement scheme that would help beneficiaries maintain a stable standard of living as they attempt to elevate themselves out of poverty (if implemented correctly). Sri Lanka has used cash transfers in the past to address the systematically poor, and those impacted by sudden shocks, but reform is needed on both these fronts.

The Samurdhi System and its failings

Sri Lanka’s main cash transfer program to tackle systemic poverty, the Samurdhi scheme, makes periodic cash transfers to those deemed to be most vulnerable in the society. The eligibility criterion is straightforward and those falling below the poverty line of Rs. 6000 are eligible to apply. It is evident that this system allows for colossal administrative expenses and targeting inefficiency, defeating the very purpose of its existence. LIRNEasia’s 2021 nationally representative survey shows that the Samurdhi program is poorly targeted with a high level of inclusion and exclusion errors, exemplified by 7% of the top tier of the socio-economic classification (SEC A) having access to Samurdhi benefits while almost 55% of the lowest tier (SEC E) not having access to the same. The administrative expenses, which pose a considerable burden on the state can and should be lessened at this time of crisis when fiscal consolidation is urgently required.

Is the Samurdhi amount sufficient to sustain the beneficiaries?

It is imperative to ensure the amount handed out through Samurdhi be sufficient to cover the costs of beneficiaries considering the increased inflation in the economy, with YoY headline inflation at 45.3% in May 2022. Although the 2019 poverty line (with a 2012/2013 price basket) was calculated at approximately Rs. 7000, inflation adjusted poverty lines are much higher. At current levels, the adjustment should amount to approximately Rs. 11,879 when the original poverty line of Rs. 6966 is adjusted by food and non-food inflation levels as per the food and non-food consumption ratio of those who live below the poverty line – according to the NCPI month on month inflation figures.

Improving the existing Samurdhi System

The current system could benefit from better delivery mechanisms. Using a map generated by GPS coordinates, it was pointed out that the ability to receive money through ATMs and mobile cash outlets would lessen the need for beneficiaries to travel to Samurdhi banks which are more sparsely located. Considering that 77% of regular recipients of state grants have access to non-Samurdhi bank accounts, as shown in LIRNEasia’s 2021 survey, this is a very viable solution that could be carried out with relative ease.  Better targeting is also key. Sri Lanka should explore using alternative data streams and indicators to reduce inclusion and exclusion errors. The 2019 (gazette 2128/24) schedule detailing a new methodology for identifying low-income families is a start.

Reform is now the need of the hour, towards which it is necessary to rethink our existing systems and institutions. The event reinforced that a nexus between making processes more efficient and protecting the interests of the most vulnerable must be sought in order to establish a just society.

Gayani’s slides can be found here
The livestream of the event can be found here (Gayani’s comments begin at 46:50)

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