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The importance of widening and re-envisioning social safety nets 

28 Jul 2022

  • Former CBSL Asst. Governor calls for prioritising livelihood promotion over subsidy dependence 
BY Sumudu Chamara Although Sri Lanka has several social welfare programmes in place, the current economic situation has increased the need for more and more effective social safety nets. However, it is necessary to limit these forms of assistance only to those who are genuinely in need of such assistance, and go beyond merely giving people temporary assistance which makes them dependent. In addition, in the process of protecting and reviving the economy, it is crucial to look into stabilising household economies and livelihoods, and increasing labour force participation, among other things.  These points were raised during a public seminar – titled “Vulnerabilities and Deprivation in Sri Lanka Today – Rethinking Social Safety Nets” and held by the Central Bank of Sri Lanka’s (CBSL) Centre for Banking Studies on Tuesday (26) – where former CBSL Assistant Governor Dr. Anila Dias Bandaranaike emphasised that it is high time to focus on giving people stable livelihoods, instead of subsidies, while also taking into account the country’s present economic situation to assess how the country can achieve that. Social safety nets and the economy  Dr. Bandaranaike noted that there is no single definition for social safety nets, adding that while some definitions say that social safety nets consists of non-contributory assistance to improve the lives of vulnerable families and individuals experiencing poverty and destitution – some examples being in-kind and food transfers, conditional and non-conditional cash transfers and fee waivers – other definitions describe them as programmes that protect families from the impact of economic shocks, natural disasters and other crises.  “Sri Lanka has had such social safety nets funded by several donors such as the World Food Programme (WFP), the World Bank (WB), the United Nations Children’s Fund (UNICEF), and the Save the Children Fund, to name a few, for years. Yet, with all this support in a country with mostly arable land and plenty of water for irrigation, it is shocking that 70 years after Independence, two million of our people were suffering from food security well into 2019 before the Covid-19 pandemic. In this crisis, two years later, the numbers are much higher.” She emphasised that Sri Lanka has never put in place a system that the country can manage on its own, and has always been depending on outside parties to support the country.  “Today, Sri Lanka is at its most destitute economic level in its post-Independence history,” she said, warning that the country will likely have to face further economic deterioration before the economic issues get better, and that existing social safety nets have failed to protect the people. Sustainable development  Dr. Bandaranaike added that the economic crisis has made it very clear that the country’s development is not about numbers, but about how the economy can provide the goods and services to ensure people’s livelihoods and to improve their wellbeing, and that this is what the country has been unable to achieve in recent times.  With regard to improving the overall wellbeing of the people, she noted that this endeavour includes material support such as food and housing, intellectual support such as education and employment, and emotional support such as the freedom of beliefs and sense of personal safety. Regarding sustainable development, she said that it focuses on improving well-being while safeguarding the environment and resources for the future. In addition, with regard to social justice-related aspects of this process, she said that all opportunities for improving well-being must be impartial to race, religion, social status, gender or any other difference. Social safety measures available for Sri Lanka’s workforce  She also spoke about the country’s labour force’s contribution to, and role in the national economy. As per 2021 statistics regarding social safety measures available for different sectors of the country’s workforce that she presented, the public sector, which has a 15 per cent employment share, has a form of social security, in the form of non-contributory pensions. The formal private sector, which has a 26 per cent employment share, has Employees’ Provident Fund, and Employees’ Trust Fund, while the informal private sector, which accounts for the biggest employment share with 59 per cent of the overall workforce, has no social security. She added: “When we look at the economic output share of these sectors, or the gross domestic production, we can see that the formal private sector’s share is about 35-40 per cent, while the informal private sector’s share could be more than 50 per cent.” Social safety nets for the foreseeable future With regard to restructuring social safety nets in the short run, Dr. Bandaranaike expressed concerns about the fact that the Government does not have adequate funds and is surviving on borrowings. Adding that the country cannot forget its most vulnerable and deprived groups, who she said account for 10-15 per cent of the population, she further said: “We will probably need to seek donor assistance from agencies such as the UN World Food Programme (WFP), and the World Bank (WB). But we have to set an exit mechanism to ensure that social safety nets are transitional, or that over time, these people are given a fishing rod to catch their own fish rather than giving fish over and over again. I think that even donor agencies will be happy with that kind of an approach. Then, obviously, we have to reduce the expenses of the Samurdhi system. Why can’t we use Grama Niladharis, primary health care and school systems to deliver nutrition and medicine and such things? Why do we need another layer of 23,000 people that cost the State so much? We have to rationalise the delivery system.” Regarding lost livelihoods, she said that although around 60 per cent of the population earn considerable salaries, their livelihoods have been lost completely. She added that Sri Lanka should obtain around $ 500 million bridge financing per month for key imports that will allow these people to resume their livelihoods and earn money.  She emphasised that providing assistance to revive livelihoods is a huge priority. Removing price and wage anomalies is another key area that needs to be addressed, according to Dr. Bandaranaike, and she explained: “We should remove all subsidies. Let the prices reflect the costs. In addition to what has already been adjusted, adjust the prices of everything including bus fares, train fares and electricity fares. However, we cannot just leave the people. Minimum wages have to be raised above the new poverty line, and the wages have to be tied to productivity. Direct taxes should be raised to increase revenue so that we can meet all these needs.” With regard to long term measures, she noted that it is necessary to eliminate the people’s and businesses’ excessive dependency on various forms of support, debt and tax cuts and breaks. She opined that the country cannot afford such subsidies any longer.  Adding that it is also necessary to raise labour force participation, she explained: “Only 35 per cent of our females are working due to reasons such as bad public transport services and the high cost of child care or elderly care compared to what they earn. Therefore, we have to have higher wages, and create a situation where females join the labour force.” Encouraging various forms of innovative livelihoods, entrepreneurship and start-ups, and also creating gainful employment opportunities especially for females, were also areas that need to receive attention in the long run, according to Dr. Bandaranaike. In addition, including in the school curricula, analytical thinking, financial literacy, communication skills such as English and information technology (IT) were also mentioned as areas that require attention. Moreover, providing decent wages linked to productivity and updating archaic labour laws including those affecting females’ working conditions and encouraging worker friendly working conditions were also suggested. Food security and nutrition, housing, sanitation, drinking water and cooking fuel, and access to public transport, health care and schools, were among other types of vulnerabilities and deprivations she said need to be addressed. She added that Sri Lanka should look into sustainable nutrition programmes and providing planting material for food gardens in schools in order to address food insecurity and malnutrition, while also launching programmes to reduce regional variations in access to safe sanitation, safe water and cooking fuel, and to public transport and health care. With regard to non-State support required for social safety nets, she said that in a context where the Government is bankrupt with no hope of money until the International Monetary Fund (IMF) programme or other entities come forward to support, Sri Lanka has to help itself. To do that, she noted that corporates’ and individuals should consider organising and promoting sustainable nutrition programmes in schools, sustainable community based food security programmes, crèches and day care to raise the female labour force participation rate, sustainable community based ecotourism and craft and culinary projects to raise the female labour force participation rate, and English and IT classes in vulnerable areas to raise employable skills.  In conclusion, she further noted that Sri Lanka’s social security nets must recognise the country’s bankruptcy, and that social security nets to support only the most vulnerable with an exit mechanism must be targeted. The Government has already paid more attention to ensuring and improving social safety nets for those who are in need of such support, especially due to the existing dire economic situation. However, economic experts have stated that while the existing programmes need to be streamlined, expedited and augmented, newer and innovative programmes can also help reduce the impact of the economic crisis on low income or vulnerable groups.  However, as was noted during the seminar, social security programmes should be provided carefully. While ensuring immediate assistance when necessary, it is vital to focus on stabilising household economies and strengthening livelihoods to help people stand on their own two feet instead of becoming dependent on external support.   


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