Will these social safety nets catch us?

Friday, 12 May 2023 02:34 -     - {{hitsCtrl.values.hits}}

Following the approval of the Extended Fund Facility (EFF) by the International Monetary Fund (IMF), the World Bank (WB) has signalled a willingness to extend financing to Sri Lanka in order to develop social safety nets. 

As a result, the Cabinet of Ministers approved the proposal presented by the President in his capacity as Minister of Finance, Economic Stabilisation, and National Policies to have the Presidential Secretariat carry out the coordination process of the aforementioned proposed program and to authorise the Department of Foreign Resources of the Ministry of Finance to negotiate with the World Bank in order to obtain those funds.

The IMF estimates that around 30% of developing markets and 60% of low-income countries are now in high danger of debt crisis. The democratic, socialist republic of Sri Lanka is also one of these countries, now up a creek without a paddle as we have struggled to build a comprehensive social protection plan. While worker unions exist and free services of health care and education survive, the majority of low-income wage earners now find it hard to subsist. Attempts have been undertaken to build a unified social protection plan that may serve as a guide for government welfare programs. Social protection initiatives in Sri Lanka have been implemented irregularly in the past, but the nation now appears to be creating a comprehensive social protection policy.

The World Bank has offered major assistance to developing nations’ social protection programs, especially emerging markets. Some examples of World Bank support for emerging market nations’ social safety systems include assisting low-income countries in developing their social safety nets and making them more shock-responsive, so that they are better prepared for disasters. For example, the Bank has helped Mauritania build both the Tekavoul cash transfer program for the chronically impoverished and the Elmaouna shock-response program for seasonal cash transfers. 

Over the fiscal years 2001-2013, the Bank financed safety nets and other social security and labour programs totalling $ 24.8 billion, with 107 countries and regions benefiting from Bank initiatives totalling $ 14.6 billion in safety nets alone. The World Bank has agreed to provide money to the government as part of its Development Policy Financing Program. In accordance with the IMF’s Comprehensive Funding Facility Program, the Government of Sri Lanka has adopted a comprehensive economic stabilisation and recovery program, including required measures to address macroeconomic issues. The pace of continuing progressive tax changes should be maintained, and social safety nets should be enhanced and targeted more specifically to the poor.

In 2020, over 13 individuals out of every 100 were living in poverty. According to a recent World Bank report, the number nearly doubled to 25 last year. This rise has resulted in an additional 2.5 million individuals falling into poverty by 2022. Many households were hurt on many fronts, according to the report, as prices climbed by 46% last year and jobs in services and industry declined, forcing people to choose lower-paying agricultural occupations. The drop in remittances had also impacted income levels.

In addition, the Central Bank of Sri Lanka issued a statement following the virtual investor presentation held on 30 March this year, stating that the IMF Board approved for Sri Lanka’s IMF program has been able to unlock up to $ 7 billion in funding from the IMF and other Independent Fiscal Institutions.

While Sri Lanka has made attempts to build a comprehensive social protection plan and manage social and environmental concerns, any system development necessitates further research with other emerging market systems