Reform social safety net to truly support the poor
We are not surprised by the findings of a government taskforce that has revealed significant shortcomings in the social safety net programmes. These challenges—including misallocations, beneficiary inclusion errors, inadequate provisions, poor programme design, and the absence of robust income support measures—have long served as barriers to achieving their core objective of addressing poverty. The taskforce's report, submitted last week, sheds light on these issues in considerable detail. Using the 2022 Household Income and Expenditure Survey, it estimates that between 2010 and 2022, social safety net programmes contributed to reducing extreme poverty by only 0.6 percentage points, and moderate poverty by only 0.8 percentage points.
It goes without saying that these outcomes could be improved significantly, despite resource constraints, if the structural problems were resolved. Currently, 53.9 percent of the poor and vulnerable families are excluded from social protection programmes, mainly because of inclusion errors. On the contrary, 62 percent of non-poor households receive some form of benefit. Ensuring that the funds reach only the vulnerable and deserving families should have been a top priority, yet successive governments have failed to address it. Corruption by officials and local elected representatives who are in charge of enlisting beneficiaries is not the only factor here—the very manner in which this is one is also problematic.
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There are also too many irrelevant, often overlapping, schemes that not only inflate the budget but also limit their transformative potential. For example, we have repeatedly questioned the logic of including schemes such as pensions for government employees, subsidies, or interest payments on national savings certificates within the social safety net. The extent of this misallocation or rather manipulation can be understood from the fact that of the six largest schemes by budget allocation, only one—for old-age allowance—can be considered a genuine social protection measure. It is no wonder that while, on paper, social protection spending in FY 2024-25 accounts for 2.5 percent of GDP and 17 percent of national budget, it drops to only 1.2 percent and 7 percent, respectively, when schemes linked with pensions and subsidies are excluded.
These issues not only affect the number of potential beneficiaries but also the size of benefits received. The taskforce's report also talks about the fact that there has been virtually no progress in introducing interventions based on social insurance principles (such as unemployment insurance), while the capacities of different ministries and departments remain grossly inadequate, with persistent dependence on development partners. The lack of income support measures means that the beneficiaries remain trapped in the cycle of poverty, and in need of continued support, which is the opposite of what such measures should be aiming for.
These issues should be addressed if the social safety net is to deliver its intended outcomes. As the taskforce report indicates, correcting inclusion errors and reallocating resources exclusively to impoverished households could increase the reduction of extreme poverty by 1.3 percentage points and moderate poverty by 2.5 percentage points. The interim government is uniquely positioned to implement these reforms by overhauling the whole structure. It must ensure that the poor are properly supported, while also providing them with the means to attain self-reliance over time.
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