Transcript Impacts of economic crises on children

Budgeting for children in an uncertain world:
Reckoning with economic and financial crises
Paola Pereznieto
ODI Research Associate
Structure of the presentation
• Impacts of economic crises on children:
evidence of past and current crises
• Social sector and poverty reduction budgets in
the context of the crisis
• Post crisis budgeting
• Policy responses and fiscal implications
• Recommendations
• Useful resources
Impacts of economic crises on children:
evidence of past and current crises
• Economic crisis estimated to have trapped 46
million more people than expected on less than
US$1.25 a day; 53 million pushed into $2-a-day
poverty.
• This is in addition to the 130-155 million people
pushed into poverty in 2008 because of soaring
food and fuel prices (World Bank, 2009)
• Downturn has impacted developed and
developing countries
Financial Crisis - General
General regional and
international macroeconomic health
Dimensions of
the macroeconomic
environment
Remittances
General regional and
international macroeconomic health
Trade and prices
(commodities
and services)
Financial
flows
Exchange Rates
Meso-level
effects of the
financial crisis
Policy
responses
Functions of
the
household
Reduced access to
credit
Civil society
policy
advocacy +
service
provision
Household
management
of assets
and investments
Declining investment
in public services
(education, health, nutrition,
water and sanitation, housing,
protection, care)
Aid
Fiscal space
Rising
unemployment,
under-employment,
declining working
conditions
Declining social capital;
rising social violence
Policy responses
(Fiscal stimulus, trade policy, monetary policy, aid policy
pre-existing and crisis-response investment in basic services,
pre-existing social protection infrastructure and crisis-specific measures,
labour policy)
Household
consumption
(food and services,
both quantity
and quality)
Household
labour
allocation
Reproduction,
nurture, and
care
Intra-household dynamics & household composition
Child-specific vulnerabilities
Deprivations of rights to survival, development, protection, participation
Political
economy
dynamics
Protection
(physical
and emotional)
& promotion
of well-being
Contribution to
community life
Impacts of economic crises on children:
evidence of past and current crises
ODI - Harper, Jones, McKay and Espey (2009):
• Analysis of past crises (East Asia, Eastern Europe,
Latin America and East Africa) shows impact on
children:
– increases in child mortality and morbidity,
– child labor, child exploitation, violence against
children and women and other forms of abuse
– decline in school attendance and the quality of
education
– reduced nurture, care and emotional wellbeing.
– increase in parental mental ill health, impacting on
children
Impacts of economic crises on children:
evidence of past and current crises
UNDP Latin America: Fernandez and Lopez Calva,
2009
• Economic downturns have significant impacts in
long-term households’ well-being.
• In all countries studied there was evidence of a
negative impact on child mortality or child health;
• the impact on education is more ambiguous
• There is also strong evidence that recessions are
associated with increases in child and overall
poverty.
Impacts of economic crises on children:
evidence of past and current crises
IDS: Hossain et al., (2009)
Study in Bangladesh, Indonesia, Kenya, Yemen and
Zambia:
• Food absorbing higher proportion of income;
• Less diverse food consumption/lower nutritional value,
women eating least/last;
• Range of health impacts reported;
• School absenteeism and dropout, child labor;
• Intra-household tensions, abandonment of children
and elderly and signs of rising social tension;
• Criminalization of youth and rising crime.
Impacts of economic crises on children:
evidence of past and current crises
UNICEF: Mendoza, et al 2010
Since late 2008 and into 2009, more severe coping
strategies are being observed:
• Families eating less (and less nutritious) meals
• Children dropping out of school and turning to
begging and illicit activities
• Evidence of starvation and death in some parts of
the developing world.
• High vulnerability to exploitation and abuse of
women and children
Impacts of economic crises on children:
evidence of past and current crises
• As a result of the crisis, there is evidence from past
crises and this crisis of reduction in fiscal resources
available to governments affecting service delivery, not
just in education, health, sanitation and water, but also
in areas such as child protection, childcare and social
protection (which are usually sidelined)
• This takes place at a time of higher demand for such
services: some people with lower incomes might shift
from private to public providers
• This is compounded by an expected reduction in aid
receipts, often a critical source for social policy
expenditures.
Social sector and poverty reduction
budgets in the context of the crisis
• Recent UNICEF analysis (Ortiz, et al 2010) highlights
positive expenditure trends for the majority of
countries in all regions:
• Globally, 70 percent of developing countries increased
public expenditures by an average of 4.1 percent of GDP
(median value of 2.7 percent).
• About two-thirds of countries in Sub-Saharan Africa and
East Asia and the Pacific increased total government
spending by an average of 4.3 and 7.9 percent of GDP,
respectively, when comparing 2008-09 average spending
levels to those in 2007.
Changes in Total Government Spending by Region,
2008-09 average versus 2007 (in percent of GDP)
Source: Ortiz, et al, 2010 calculations based on IMF REO publications (April-May 2010) and IMF country reports
(July 2009-July 2010).
Social sector and poverty reduction
budgets in the context of the crisis
• Economic stabilization efforts and built-up buffers have enabled
many developing countries to soften the impact of the crisis on
their economies and populations by expanding public spending
during 2008-09 (IMF 2010).
• International agencies such as IMF and WB have been
encouraging lower income countries (with relatively stable
macroeconomic basis) to preserve or increase social spending to
protect the poor. Eg: Exogenous Shocks Facility (ESF)
• Some countries have actively promoted ring-fencing social
sector budgets, for example, Thailand passed legislation to
protect health sector budget to avoid problems in health service
delivery
• The need for preserving social spending appears generally better
recognized in this crisis.
Social sector and poverty reduction
budgets in the context of the crisis
• Emerging evidence suggests that a considerable
number of developing countries protected or
increased social spending and other priority
spending during 2008-09, despite falling
revenues.
• For example, on average about 24 percent of the
total announced fiscal stimulus amounts by
developing countries was directed at pro-poor
and social protection programs (Ortiz, et al
2010)
Social sector and poverty reduction
budgets in the context of the crisis
• Yang et al (2010) show that 16 of 19 low income
country programs initiated in 2008-09 supported by
IMF lending facilities had budgeted higher social
spending in 2009.
• In Sub-Saharan African countries with IMFsupported programs, recently available spending
outturn data show that the median value of social
spending increased by 0.5 percent of GDP from
2008-09, and real spending growth accelerated from
4.8 to 6.8 percent (IMF, 2010).
Social sector and poverty reduction
budgets in the context of the crisis
• HOWEVER, not all of this higher spending has been
channelled to sectors and programmes reaching children;
social spending has not been prioritised in all countries:
• For example, in India (HAQ Centre, 2009)
“Despite a huge stimulus budget in 2009-10, children—44 per
cent of the population--got only 4.21 per cent, the least in four
years”
• As a result of limits to fiscal position, some countries
experiencingeconomic crises have less ability to provide social
services to the poor, justas the needs of the poor increase.
This is particularly true in case of the growing needs and
demands of children
Post crisis budgeting
• Compared to 2008-09, analysis (Ortiz, et al 2010)
indicates that more countries are expected to reduce
total government expenditure in terms of GDP in
2010-11:
– as many as 56 / 126 developing countries (or 44
percent) are forecasted to contract total government
expenditure by an average of 2.7 percent of GDP
• On average budget deficits are expected to halve in
2010, with the fastest cuts occurring in those low
income countries that are most in need of protecting
vulnerable populations
Post crisis budgeting
• Kyrili and Martin (2010) examine national budget
documents for 56 low income countries and find
thatwhile two-thirds of countries in the
sample increased their budget deficits to
counter the effects of the global crisis in 2009,
only one-quarter have continued related
recovery programs in 2010.
Post crisis budgeting
• In Sub-Saharan Africa, about half of developing
countries are expected to contract total expenditure
as a percentage of GDP under current policy
directions.
• This is driven by a substantial decline in expected
revenue in 2010-11 compared to 2008-09, as well as
the apparent inability to secure new financing to
offset revenue shortfalls, reflecting the region’s
relatively high initial debt burden and limited access
to capital markets (Ortiz, et al 2010)
Post crisis budgeting
• BUT THERE ARE IMPORTANT RISKS TO CUTTING
PUBLIC SPENDING - PARTICULARLY SOCIAL SPENDING
- TOO EARLY
• A contracting expenditure environment is historically
associated with greater risks of social spending being
adversely impacted.
• Past evidence of crises suggests that when
governments resorted to aggregate fiscal cuts, social
spending was typically unprotected.
Post crisis budgeting
• Social spending and investments should be ring
fenced, if not increased, in order to preserve
countries’ pre-crisis investments in the social sectors.
• This is critical in preventing the crisis from causing
permanent harm to children (by harming their future
capabilities) and families
Post crisis budgeting
• Thus, on balance, despite the greater policy
emphasis on preserving “priority” expenditures,
social spending cuts remain a major concern for
many developing countries in a climate of fiscal
contraction.
• Need to improve the efficiency of spending by
strengthening governance and the quality of fiscal
institutions, which could help increase the level of
social services without additional spending in the
medium term (Gupta, et al., 2008).
Policy responses and fiscal
implications
• According to ODI analysis (Harper, et al 2009),
based on evidence of the impact of crises on
children’s wellbeing, in addition to investment in
education, health, nutrition, water and
sanitation, increased spending must also include
child protection
• Spending on child protection should go well
beyond orphans and vulnerable children to
include all children living in impoverished and
vulnerable households
Social sector and poverty reduction
budgets: ring-fencing resources for children
• Evidence of impact of crisis on rising levels of abuse
and exploitation of children mean that resources to
child protection services should be prioritized:
– for example more resources should go to hotlines
providing support, counseling, shelters, re-integration
programs
• More and better spending on social protection
measures including Cash transfers, food/cash for
work programmes, social insurance is vital to
address vulnerability and inequality.
Policy responses and fiscal
implications
• Need for analysis of cost effectiveness of interventions aimed at
reducing poverty, particularly those for children:
– For example, there is ample evidence of regressive nature of
food and energy subsidies to which significant social spending
was allocated.
• Currently greater endorsement of increasing budget allocations
to targeted social protection programs, found to be more cost
effective for poverty reduction
• Challenge: choice of program design features and institutional
arrangements should be consistent with the administrative
context and capacity in the country.
• Complementary measures to guarantee basic services for the
poor and the near-poor to reduce changes of falling into poverty.
Policy responses and fiscal
implications
According to UNICEF, ‘Recovery with a Human Face’
Five Actions should be taken at the country level:
• Analyzing budgets for social and economic recovery
• Scaling up social protection
• Maintaining (if not increasing) core social
expenditures
• Identifying sources of fiscal space
• Providing options to assist the government in a
country dialogue on crisis responses
Policy responses and fiscal
implications
Child sensitive and gender budgeting:
• There is ample evidence of the impacts of the crisis having
a differential impact on women and children.
• For example, in the crisis, women were frequently the first
exposed to retrenchments and reduced pay in export
industries (Bauer and Thant, 2010)
• Increased vulnerability for women / mothers can also have
an impact on children’s wellbeing.
• Gender sensitive budgeting during recovery is thus critical
to support improvement of the situation of children and
women. Eg: financing employment promotion schemes for
women, counselling services to women victims of abuse,
etc.
Resources
ODI and UNICEF
The Global Economic Crisis – Including Children in the
Policy Response
November 9-10, 2009
http://www.unicef.org/socialpolicy/index_50299.html
UNICEF and Fordham University
Joint Forum “Child Friendly Budgets for 2010 and
Beyond: Toward Global Economic Recovery with a
Human Face” New York, February 18th, 2010
http://www.unicef.org/socialpolicy/index_52658.html