Transcript Social Welfare and Child Protection

The System of Cash Transfers
in Bosnia and Herzegovina
Issues in the design of an
effective and affordable system
Christian Bodewig
The World Bank
The challenge of improving efficiency and equity
of cash transfer system in BiH given limited
resources
Need for reform of cash transfer system in BiH for
reasons of
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Fiscal affordability
Effective and equitable social protection and poverty
alleviation
Implications for Reforming…
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…Veterans’ Benefits
…Social and Child Assistance
…Employment Services
…Pensions
The challenge of improving efficiency and equity
of cash transfer system in BiH given limited
resources
Key observation:
Overall spending on cash transfers in BiH is
substantial, but the structure of spending across
different programs has failed to evolve to meet the
needs of a society and economy moving from postconflict reconstruction to longer-run development.
Veterans’ Benefits I: BiH has one of the most
extensive and generous veterans’ entitlements in
the world…
Veterans’ benefits single major cash transfer in both
Entities – around 4 % of GDP, with additional spending
at sub-Entity level, estimated at around 1.3 % of GDP
in FBiH and 0.4 % in the RS
Additional significant indirect transfers, resulting in
substantial forgone revenues from health contributions
and co-payments, and tax and customs revenues,
adding up to around 1% of GDP
Added up this is roughly equivalent to spending on the
entire education system at all levels in both Entities
and three quarters of health expenditures
Veterans’ Benefits II: …but benefits are poorly
targeted and fail to effectively protect those
most in need
Poor targeting: Despite large amount of resources,
system fails to protect most vulnerable beneficiaries.
Beneficiaries mainly family beneficiaries (around 60%
of total) and veterans with lower categories of
disability (60-65% of disabled veterans)
Entitlements not related to ability to work, actually
having work or receipts of benefits from other parts
of cash transfer system
Legislated entitlements remain far above available
resources and are unsustainable – systems are
already accumulating increasing arrears
Veterans’ Benefits: Reform suggestions
Harmonize legal frameworks
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FBiH single Entity law
Simplify/rationalize entitlements:
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Consider removing those with disabilities below 50-60%
from benefit entitlement, though not from system altogether
Eliminate benefits for grandparents and siblings
For parents: target benefits to those most in need, in
particular where working or receiving other cash transfers
For spouses, impose restrictions related to re-marriage
For children: reduce maximum age for benefits to end of
school
Initiate re-certification and improve reliability,
timeliness and transparency of data
Social Welfare and Child Protection: Both
Entities, particularly the Federation, spend least
in regional comparison
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3.0
2.5
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1.5
1.0
0.5
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Percent of GDP
Comparative Social Welfare and Child Protection Spending
(in % of GDP)
Social Welfare and Child Protection: Financial
crisis and lack of coherent and sustainable
structure
Even where there are legislated entitlements, they
are often irrelevant due to resource constraints
Small proportion of registered beneficiaries actually
receive benefits
Wide variation of benefits paid across Cantons in the
Federation, especially in child protection
Decentralized financing at municipal level: vicious
circle of poorest areas least able to pay benefits
Unclear division of responsibilities across
governments
Poor coordination between different benefit programs
and delivery mechanisms
Social Welfare and Child Protection:
Reform suggestions I
Policy Framework: Legislate new Social Protection
Strategies in both Entities emphasizing:
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Realistic core set of entitlements, with clearly defined
financing source incl. transfers from Entity budgets to
finance one or more core benefit equitably
Create incentives for adequate local government spending
on social protection through matching grants
Review existing targeting criteria in light of newly available
data from LSMS, and evaluation of CSW ability to means-test
effectively in highly informalized economy
Provide equal incentives for community-based and
institutional care
Social Welfare and Child Protection:
Reform suggestions II
Institutional Framework:
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Redefine institutional responsibilities for social protection
Establish sound regulatory framework for CSWs
Role of NGOs in Welfare Provision
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Establish legislative and regulatory framework
Data Reporting System
Employment Services: Lacking in focus, clear
institutional structure, accountability and
transparency
Challenges for Employment Services:
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Demand for effective programs likely to rise with further
privatization and enterprise restructuring
Need for effective intervention through unemployment
benefits and effective job search services
Institutional issues:
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Incomplete implementation of Federation EI institutional
arrangements, with Hercegovacki-Neretvanski Canton EI still
to be established
Parallel existence of former "State" EI without clear legal
basis
Employment Services: Lacking in focus, clear
institutional structure, accountability and
transparency
Programmatic and operational issues
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Unemployment benefits: Despite large number of registered
unemployed, very low share actually receive benefits
Wage subsidy programs often unfocussed, unmonitored,
ineffective and inefficient
Relatively high operating costs, especially MEI and RS EI
Employment Institutes: Reform suggestions
Institutional and operational issues:
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Set up new, small agency at State level
In FBIH: Hercegovacki-Neretvanski Employment Service to
join FBIH EI structure as Cantonal EI
Strengthen program monitoring and evaluation capacities
Policy issues:
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Unemployment benefits: increases in replacement rates and
duration not justified by regional comparators and BiH’s level
of income and available resources
Decrease spending on wage subsidies in FBIH and MEI
Focus more on pre-lay-off job search services and general
job-search
Build on Pilot Emergency Labor Redeployment Project
(PELRP) lessons
Pensions: Improving financial discipline,
transparency and accountability
Significant steps made towards stabilization and
sustainability of the pension systems
Key: aligning benefit levels with present and future
resource realities so as to avoid running arrears
Critical to short-term financial sustainability: cash
rationing rule tying pension levels above minimum to
availability of regular pension resources on a monthly
basis, by application of pension coefficient
Pensions: Improving financial discipline,
transparency and accountability
Medium-term reform priorities: stabilize contributions,
strictly stick to cash rationing rule and pay pensions on
time. Further stabilization requires:
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Continued economic growth
Regularization and formalization of W&S payments, expansion
of formal sector employment
Severance payments – no pensions!
No payroll contribution exemption/relief
Enforce existing financial planning and reporting rules for the
pension funds
Initiate thinking about systemic reforms through joint
working groups
Summing up…
Reforming veterans’ benefits key priority in reforming
cash transfer system
Need to free up resources from veterans’ programs
for social welfare and child protection programs,
while working on improving access to productive
employment opportunity for persons with special
needs and ability to work
Need to ready employment services for expected
increase in demand for services due to economic
restructuring
Reform agenda supported under SOSAC II