Focus on public welfare

With every passing week, the price of essential goods keeps rising which in turn is leading to a worrying shortage of these goods. Indeed, so dire is the situation, the Government over the weekend warned of a food rationing system possibly being implemented to combat the rising prices.

Importers for their part have laid the blame squarely at the feet of the Government, claiming that a combination of too much Government intervention, the foreign exchange crisis and a deficiency in buffer stocks are some of the key reasons behind rising price of commodities.

This would not be so frustrating if it had not been so predictable. The Government’s solution of price controls was always going to be unsustainable, as it has been proved in recent weeks and months.

Rather, what would have been a far more sustainable solution was revamping the current welfare system in place in the country. This is a long overdue move that requires much attention but equally important is depoliticisation of this sphere. 

In 2019, the Government took steps to expand Samurdhi by 600,000 people. Samurdhi is the largest social welfare program in the country, which was allocated Rs. 43 billion in 2017 and already had about 1.4 million families on its roster. Despite poverty eradication being a key message in all political campaigns, there is an absence of clarity about how the Samurdhi program should be developed. 

Many analysts, and even politicians themselves, have admitted that the selection process for the program has been less than ideal, with many families that are not below the poverty line competing to receive Samurdhi funds. Given that Sri Lanka has a high percentage of families in near poverty, inclusion remains attractive. 

The politicisation of Samurdhi is also helped by the fact that poorer families also find it difficult to access loans from conventional banks. Since their financial inclusion is poor, Samurdhi recipients are more likely to turn to the Samurdhi Bank, which will provide them with capital at moderate interest rates; an easy and better alternative to loan sharks. 

Expanding social welfare is good, especially given the COVID-19 impact. However, the problem with increasing Samurdhi recipients is that unless allocations are also raised proportionately, the impact of the funds is reduced. In addition, the leakage of funds could also increase, straining an already difficult public finance situation. 

The World Bank, in a 2016 benchmarking exercise, found that Samurdhi has had a minor and decreasing impact on poverty reduction. Samurdhi transfers are too small to make a large impact on poor households’ budgets, as they contributed only 1.7% to household consumption of the poorest 20% of the population in 2012/13. 

In addition, there are many other areas such as skills development, taking jobs outside the Western Province, market access, entrepreneurship promotion and technology transfer that are linked to anti-poverty policies. It is also essential that these be gender sensitive as women are disproportionately impacted by poverty. 

On the basis of this data, it could be argued the time has come for the Government to decide whether Samurdhi is a poverty alleviation program or an entrepreneurship drive. If it is the former, then Samurdhi should be reformed so only genuinely poor families are identified and are given a higher amount of funds that can have a tangible impact. 

The Government should also regularly gather data on these families to track how many of them emerge from poverty and link Samurdhi to healthcare, education, housing and other projects to ensure the most vulnerable are properly assisted.

While it is a regrettable situation the Government finds itself in, with multiple crises on its hands, the only long-term solution is an efficient welfare program for the most vulnerable in society. A good starting point would be ensuring politicians cease misdirecting and wasting public funds under the guise of poverty alleviation without having transparent, efficient, and achievable policies in place first.