## tnmea2022007 ## Source details **Canonical URL:** [tnmea2022007](https://www.imf.org/-/media/files/publications/tnm/2022/english/tnmea2022007.pdf) ## Other formats - [Markdown version](/-/media/files/publications/tnm/2022/english/tnmea2022007.pdf.md) - [Structured JSON version](/-/media/files/publications/tnm/2022/english/tnmea2022007.pdf.json) --- ### Executive summary and purpose - IMF country teams increasingly engage on social safety net (SSN) issues in surveillance and program work. - SSNs prevent and alleviate poverty, promote inclusive growth, support social stability, and strengthen public support for macroeconomic and structural reforms. - SSNs increase household resilience to shocks and often have a promotion role to enhance human and physical capital. - Paper objective: guidance for IMF staff, in context of the IMF’s 2019 Social Spending Strategy, on when and how to engage on SSN issues in surveillance, program work, and capacity development. ### Drivers expanding IMF engagement on SSNs - Key drivers: - Economic volatility and shocks, including higher food and energy prices and pandemics. - Changing nature of work: technological innovation, globalization, demographic change; rising nonstandard work (self-employment, fixed-term, part-time, “gig economy”). - Climate change: increased weather volatility and natural disaster frequency and intensity. - These risks disproportionately affect low-income households, increasing macro-criticality of SSNs. ### Macro-criticality framework (three interrelated channels) - Macro-criticality assessed through one or a combination of: - Spending adequacy - Whether aggregate SSN spending is sufficient to meet social policy objectives (poverty alleviation, reducing vulnerability, income smoothing, promotion). - Initial adequacy benchmark: size of the poverty gap as a lower-bound estimate of additional SSN spending needed. - Spending efficiency - Whether SSN spending fights poverty cost-effectively and avoids undue labor (or other) market distortions. - Trade-offs: targeting to reduce leakage vs. potential work disincentives and administrative, social, and political costs. - Fiscal sustainability - Whether SSN spending can be financed without undermining government debt sustainability or crowding out other high-priority spending. - Requires MTFFs, PFM monitoring, and possibly macro-modeling when needs are large. - Policy responses often require weighing trade-offs across channels. ### Assessing adequacy, efficiency, and sustainability — methodological highlights - Adequacy: - Aggregate poverty-gap approach: starts from observed poverty gap; provides lower-bound estimates assuming perfect targeting. - Eliminating poverty in most EMDEs would require significantly increasing SSN spending and scale; spending needs rise further when including broader SSN objectives. - Efficiency: - Targeting methods (means-testing, proxy means testing, geographic, community, self-selection, categorical) affect leakage, errors of exclusion, administrative costs, and work incentives. - Fragmentation and duplication increase administrative costs; consolidation and social registries can improve efficiency. - Sustainability: - Integrate SSN plans into MTFFs and medium-term revenue strategies; reduce inefficient spending (for example, energy subsidies) and enhance tax capacity. - Strong PFM systems and spending reviews translate priorities into budgets. ### Key quantitative findings and country/regional statistics (preserve source values) - Advanced economies: - Spending on SSN programs and passive labor market programs averages about 2 percent of GDP. - Bulk of spending, averaging about 1.4 percent of GDP, is related to SSN programs, with family allowances about half. - Country examples: Canada, Finland, and France spend almost 4 percent of GDP; Lithuania, Korea, the Slovak Republic, and the United States spend less than 1 percent. - ALMPs in advanced economies: - Spending on ALMPs averages 0.3 percent of GDP. - Denmark is an outlier with ALMP spending reaching almost 2 percent of GDP. - EMDEs and variation: - SSN spending in emerging and developing Europe and Latin America and the Caribbean is similar to advanced economies; substantially lower in emerging and developing Asia and sub-Saharan Africa. - Within-region examples: Ukraine and Kosovo spend over 4 percent of GDP; Montenegro about 0.6 percent. Lesotho spends more than 5 percent of GDP; Cameroon, Guinea-Bissau, and South Sudan spend less than 0.2 percent of GDP. - Additional spending to eliminate poverty (perfect targeting assumption): - Countries in sub-Saharan Africa will need to spend about 10 percent of GDP on average, in addition to current spending. - If half of the transfer budget leaks to nonpoor households, then spending needs would be doubled. - Relative poverty (advanced economies): - Additional SSN spending required to eliminate relative poverty (poverty line = half median household income) and assuming perfect targeting would average about 1 percent of GDP. - Mean reported: 1.01 percent of GDP. - Targeting performance: - Advanced (high-income European) countries: on average around 28.3 percent of all SSN transfers accrue to the poorest 20 percent and less than 49 percent accrue to the poorest 40 percent. - Means-tested transfers are better targeted, but only around one-third of SSN transfers in high-income European countries are means tested. - EMDEs: in half of countries in emerging and developing Asia and sub-Saharan Africa, less than 35 (55) percent of transfers accrue to the poorest 20 (40) percent—close to what a universal untargeted program would deliver (20 and 40 percent, respectively). - Administrative cost examples: - Guaranteed minimum income programs in Europe and Central Asia: administrative costs ~5 percent of total program budget. - National social registries: unit registration costs between 1 and 3 percent (surveyed cases). - Beegle, Coudouel, and Monsalve (2018): administrative costs averaged 17 percent of SSN program spending in Africa for recent, small programs. - Macro-fiscal pressures: - Debt-to-GDP ratios in advanced economies averaged 82.6 percent in 2020. - Change in debt-to-GDP ratio between 2019 and 2020 averaged 12.6 percent in advanced economies and 13.1 percent in emerging market economies. - Government priority outlays for pensions and health care expected to increase by 1.6 percent of GDP in advanced economies and 1.8 percent of GDP in EMDEs, on average, between 2020 and 2030. - More than half of LICs, and a third of emerging market economies, have tax-to-GDP ratios below 15 percent. - Meeting SDG needs in five sectors by 2030 would require increasing annual government spending on average by almost 5 and 17 percentage points of GDP in EMEs and low-income developing countries, respectively. Mean reported (aggregate across regions): 10.17 percent of GDP. ### Targeting approaches, trade-offs, and policy options - Targeting methods summarized: - Geographic targeting, self-selection, categorical targeting, community targeting, means/proxy-means targeting. - Benefits of targeting: - Greater poverty impact for a given transfer budget; especially attractive when tax capacity is low or competing priorities exist. - Costs of targeting: - Efficiency costs (work disincentives), administrative costs (verifying income in informal economies), private time/money costs for applicants, social and political costs. - Choosing targeting approach depends on trade-offs and country context; financing progressivity matters: - Broader SSN coverage less concerning distributionally when tax financing is progressive. - In LICs reliant on consumption taxes, tax-and-transfer approaches may shift inefficiency to different instruments. - Options to manage labor disincentives: - Restrict benefit generosity; taper withdrawals to avoid cliffs; provide in-work support (wage subsidies); activation policies and time-declining unemployment insurance; individual unemployment savings accounts; experience rating (layoff taxes) for firms. ### Administrative capacity, digital tools, and pandemic lessons - Investments needed: registries, eligibility verification, delivery systems; trade-off between redirecting funds from transfers to systems vs. improved targeting and outcomes. - Digital tools used during the pandemic: mobile technology, dedicated websites, machine learning with satellite and phone record data, digital payment systems (mobile money). - Trade-offs and risks: - Data accuracy concerns, errors of exclusion/ inclusion, digital access gaps that can exclude low-income households, difficulties cross-checking registrations when administrative datasets are weak. - Rapid expansion versus better targeting—country context and capacity determine the right mix. ### Incorporating SSN issues into IMF country work and conditionality guidance - Country teams should: - Assess macro-criticality through adequacy, efficiency, and sustainability and explain why SSN issues are macro-critical. - Lay out SSN facts: objectives, coverage, benefit levels, delivery modalities, financing sources, implementation capacity and timelines. - Identify specific policy concerns and provide policy recommendations informed by IMF analysis and development partner expertise. - Assess macroeconomic and political implications, fiscal impacts, and implementation realism. - Verify data availability: total SSN spending, overlaps, eligibility definitions, coverage, delivery mechanisms, targeting methods. - Clarify financing options and integrate SSN strengthening into MTFFs. - Conditionality modalities: - Quantitative conditionality (PCs and ITs) often set on general social spending or selected SSN expenditure. - Structural benchmarks (SBs) for milestones (strategy development, new programs, social registries). - Prior actions when upfront implementation is critical; sequencing may require PFM strengthening first. - Recent trends in IMF-supported programs: - 2017–20: about 90 percent of Poverty Reduction and Growth Trust–supported programs included quantitative social spending conditionality (up from about 65 percent in 2012–14). - General Resources Account–supported programs with such conditionality rose to 45 percent over 2017–20 (up from 20 percent over 2012–14). ### Country experience highlights (selected examples) - Saudi Arabia (2018 Article IV): - Phase out energy and water subsidies; introduced Citizens’ Account Program (CAP) in 2018 to compensate households; recommended assessing CAP adequacy, coverage, and progressivity and improving transparency around subsidies. - Malaysia (2021 Article IV): - Pandemic highlighted need to evaluate social protection; recommended reducing coverage of the rich and increasing benefits for the poor, reforming unemployment insurance to cover nonstandard workers, unifying and streamlining programs, and identifying medium-term revenue sources. - Nigeria (2018 Article IV): - High poverty: close to 63 percent of the population lives below the poverty line; recommended well-targeted and scaled-up SSN, enhanced monitoring, and complementary measures (lifeline tariff, increased health and education spending). - The Bahamas (2020 Article IV): - Comprehensive programs but elevated poverty; in 2014 about one-fifth of the population earned below US$12 4 a day (with about 5 percent living in extreme poverty, earning below $5 per day); recommended improved social statistics, digitization (health), institutionalized information exchange, and private sector role analysis. - IMF-supported program case studies: - Ecuador (2020 EFF): target to expand coverage from 37 percent of families in bottom three deciles to 80 percent by December 2021; ITs on coverage and SBs to upgrade social registry (target date shifted to April 2022). - Ukraine (2015 EFF): increased energy-related benefits from 1 percent of GDP in 2015 to 1¾ percent of GDP and improved means-testing and social norms for utility benefits. - Madagascar (2021 ECF): expand cash transfer coverage from 283,428 households in December 2020 to 590,000 by September 2021; SBs and ITs used to strengthen monitoring and reporting. - Mauritania (2020 ECF/2021): scale-up targeted cash transfers from 34,000 households (March 2020) to 55,000 by October 2020 and commit to 100,000 by end-2021; SBs supported expansion though delayed by capacity constraints. - Senegal (2020–21): aimed to double Single National Register (RNU) coverage to 1 million households; institutionalized RNU by decree; target dates shifted. ### Operational guidance on communication and sequencing - Communication should embed SSN advice within macrofiscal context and explicitly recognize trade-offs. - Messaging priorities: - When reducing leakage/improving targeting: emphasize benefits for increasing benefits/coverage for poor, fiscal space gains, and options to increase financing progressivity. - When motivated by fiscal pressures: explain trade-offs, reductions in leakage, protection for vulnerable households, and opportunity costs of no reforms. - Sequencing: capacity constraints and PFM weaknesses may require prior PFM reforms before implementing SSN reforms. ### Tools, data sources, and external resources for staff - Internal IMF resources: analytical papers, Fiscal Affairs Department support (ad hoc consultation, desk studies, technical assistance), training and capacity building. - Analytical toolkits: - Social Protection and Labor Assessment Tool. - Expenditure Assessment Tool (EAT). - External resources and data: - World Bank ASPIRE, ILO World Social Protection Database, ESSPROS, OECD Social Spending Database, PovcalNet, Euromod, Southmod, LIS, IMF Climate Change Indicators Dashboard. - Selected external reports and guidance listed (examples include The State of Social Safety Nets Report (World Bank 2018), ILO World Social Protection Report 2020–22, UNICEF Social Protection Framework). ### SSNs and economic growth — channels and evidence - SSNs can promote growth by: - Alleviating credit constraints, protecting consumption and assets, changing resource allocation toward education and health, enabling investment in productive assets, and generating multiplier effects when transfers are large enough. - Micro-level impacts: - Conditional cash transfers have increased school enrollment and attendance in Bangladesh, Brazil, Indonesia, Jamaica, Mexico, South Africa. - Cash transfers reduce destructive coping strategies after shocks and can support human capital investment. - Evidence generally shows little work disincentive in developing countries; recipients often increase job-search and migration, raising employment. - Community and national effects: - Public works can create community assets (roads, irrigation) that raise productivity; rigorous evidence on growth impacts is limited. - SSN transfers and unemployment benefits can have large multiplier effects increasing local employment, consumption, and output (recent research cited). - Instrumental roles: - SSNs help mobilize support for growth-enhancing reforms (energy subsidy removal, tax reform), mitigate impacts on vulnerable households, and enhance social cohesion. *Source: tnmea2022007* ### Executive Summary 1 ### Executive Summary ### Introduction and purpose - IMF country teams have increasingly engaged on social safety net (SSN) issues in surveillance and program work. - SSNs are important for preventing and alleviating poverty, promoting inclusive growth, supporting social stability, and strengthening public support for macroeconomic and structural reforms. - SSNs increase household resilience to adverse shocks by preventing households from falling (deeper) into poverty, and many SSN programs also have a promotion role to enhance human and physical capital and help households avoid future poverty. - The paper provides guidance to IMF staff, in the context of the IMF’s 2019 Social Spending Strategy, on when and how to engage on SSN issues in surveillance, program work, and capacity development. ### Why engagement on SSNs is expanding - Member countries face growing economic and fiscal challenges that increase the macro-criticality of SSNs: - economic volatility and shocks, including higher food and energy prices and pandemics; - the changing nature of work, which challenges labor markets and existing social insurance programs; - climate change, which is expected to increase weather volatility and the frequency and intensity of natural disasters. - These challenges tend to disproportionately affect low-income households with limited capacity to adapt and cope, making SSNs central to protection and resilience. ### Macro-criticality of SSN spending: three interrelated channels - Macro-criticality is assessed through one or a combination of three channels: - Spending adequacy - Whether total SSN spending is sufficient to achieve a government’s social policy objectives. - Spending efficiency - Whether SSN spending fights poverty in a cost-effective manner and avoids undue labor (or other) market distortions. - Fiscal sustainability - Whether SSN spending can be financed without undermining government debt sustainability or crowding out other high-priority spending. - Consideration often needs to be given to more than one channel and to potential trade-offs among them. ### Assessment, policy responses, and trade-offs - The paper discusses methodologies and considerations for: - assessing the macro-criticality of SSN spending through the three channels above; - identifying appropriate policy responses for each channel; and - weighing policy trade-offs when multiple channels are relevant. - The objective is to: - enhance the quality and effectiveness of engagement with authorities; - ensure consistent and appropriate policy advice across country contexts; and - strengthen collaboration with development partners with SSN expertise. ### Practical focus and staff tools - Recognizing diversity in SSN systems and country circumstances (for example, level of development, fiscal space, and labor market conditions), the paper focuses on providing resources and tools to staff to: - understand the different channels through which SSN spending may become macro-critical; - assess the importance of those channels in specific country contexts; and - identify policy responses and the trade-offs involved in choosing among them. - The paper also discusses the complementary role of labor market programs (for example, unemployment benefits and active labor market programs) in a comprehensive assessment of SSN spending. ### Collaboration and timing - The paper emphasizes the importance of early engagement and coordination with: - development partners with expertise on social safety nets; and - relevant national stakeholders when formulating policy advice. *Source: Executive Summary, tnmea2022007* ### INTRODUCTION ### INTRODUCTION ### Context and purpose - In June 2019, the Board approved the Strategy for IMF Engagement on Social Spending (IMF 2019a) and invited staff to prepare a Guidance Note to support country teams on when and how to engage on social spending issues. - As input to the Guidance Note, staff is developing a series of papers on key social spending areas (pensions, social safety nets (SSNs), health, and education). This technical paper focuses on IMF engagement in SSN spending and is the second in a series covering different areas of social spending.1 - The paper’s objective is to enhance staff understanding of SSNs and their importance in IMF work by: (1) outlining channels through which SSN spending may become macro-critical, (2) showing how to assess the importance of these channels, and (3) describing appropriate policy responses and trade-offs. - The paper is aimed at supporting consistent and appropriate policy advice across country contexts, emphasizing early engagement with development partners and other stakeholders. ### Definition, objectives, and scope of SSNs - SSNs constitute a set of transfer programs aimed at addressing current and future poverty and are typically noncontributory transfer programs designed to protect households from poverty and destitution by ensuring some minimum level of economic well-being (Grosh and others 2008). - SSNs often have both a protection role and a promotion role: protection from poverty and destitution; promotion through enhancing human and physical capital to help households exit and avoid future poverty (Drèze and Sen 1991; Morley and Coady 2003). - The paper also discusses the role of passive and active labor market programs (ALMPs), which complement and interact with SSNs: - Passive labor market programs protect individuals against loss of income from unemployment. - Active labor market programs actively help individuals find a job or increase their earnings capacity.2 ### Why the IMF engages on SSNs - SSNs are intrinsically important because they are central to countries’ policies for alleviating and protecting from poverty and supporting inclusive growth. - SSNs are instrumentally important because they support implementation of economic and structural reforms needed for macroeconomic stability and sustainable growth (examples include reforming food and energy subsidies, broadening tax bases, consolidating public finances, and liberalizing labor markets and international trade). - SSNs can promote social stability and maintain political and public support for economic reforms by protecting vulnerable households from unintended consequences. ### Drivers expanding IMF engagement on SSNs - IMF engagement on SSN issues is likely to expand as member countries respond to a rapidly changing economic and fiscal landscape, with key drivers including: - Economic shocks: - Events cited include the global financial crisis, the COVID-19 pandemic, domestic and international conflict, and the recent sharp increase in energy and food prices (IMF 2018a, 2021a, 2022b, 2022c). - Rapid scale-up capacity (coverage and benefit levels) emerged as a central design feature for protecting households hit by shocks. - The pandemic exposed weaknesses of existing SSNs, especially in LICs; constraints included limited administrative capacity, lack of basic infrastructure, weak information systems, and weak delivery infrastructure. - Lessons from the pandemic highlight the importance of innovation and investments in information systems and implementation capacity, and the need for flexible and sustainable financing, preferably based on progressive tax systems. - Nature of work: - Technological innovation (including artificial intelligence and automation), increasing connectivity, globalization, and demographic changes are changing required skills and increasing diversity and fluidity of work. - There is increased reliance on nonstandard work arrangements (self-employment, fixed-term, part-time, “gig economy” jobs). - These trends challenge labor market and social insurance programs designed around regular full-time formal employment, placing a premium on SSNs centered on workers rather than jobs and on understanding SSN–labor market interactions (World Bank 2019a, 2019b; IMF 2021a). - Climate change: - Climate change increases weather volatility and the frequency and intensity of natural disasters, disproportionately affecting low-income households (Rozenberg and Hallegatte 2015; OECD 2017; IMF 2019b). - SSNs can help households adopt mitigation and adaptation measures, provide supplementary income after disasters, and support disaster preparedness and adaptation. - Structural transformation to reduce greenhouse gas emissions and higher fossil fuel prices will require SSNs to support affected workers and communities, with ALMPs helping displaced workers find employment. ### Macro-criticality framework for IMF engagement - IMF engagement on SSN issues is guided by an assessment of macro-criticality across surveillance, program, and capacity development activities. - Macro-criticality can arise through one or a combination of three interrelated channels: - Spending adequacy: - Refers to whether the aggregate level of SSN spending is adequate to meet government SSN policy objectives (poverty alleviation, reducing vulnerability, income smoothing, promoting household investment). - Spending adequacy assessments can be initially based on the size of the poverty gap as a lower-bound estimate of additional SSN spending needed to eliminate poverty. - Eliminating poverty in most EMDEs would require significantly increasing SSN spending and expanding SSN scale; spending needs are higher when broader SSN objectives are included. - Spending efficiency: - Refers to design and implementation features that ensure policy objectives are met cost-effectively while avoiding undue labor and other market distortions. - Targeting using means-testing can reduce leakage to nonpoor households but may generate work disincentives, especially when benefits are high. - Efficiency depends on trade-offs between poverty alleviation and work disincentives, administrative, social, and political costs of targeting, and the distributional impact of SSN financing. - Managing administrative costs is essential, as inefficiencies can arise from multiple, duplicating, and fragmented programs. - Fiscal sustainability: - Refers to the capacity to finance spending needs without undermining macroeconomic stability (fiscal deficits, debt) or crowding out critical expenditures. - Advanced countries with well-developed SSNs and rising pressures (e.g., aging) need measures to contain or reduce spending through efficiency gains and prioritization. - Sustainable financing in many EMDEs will require reductions in inefficient spending (for example, energy subsidies), enhancing tax capacity and tax effort based on fair and progressive tax systems, and credible medium-term fiscal frameworks (MTFFs). - Strong PFM monitoring and evaluation systems (including spending reviews) are needed to translate policy priorities into budget allocations; where SSN spending or needs are large, broader macroeconomic analysis using macro-modeling may be warranted. ### Trade-offs and cross-channel interactions - Addressing one aspect of macro-criticality can affect others and requires careful consideration of policy trade-offs and unintended consequences. - Example trade-offs: - Containing spending pressures while maintaining benefit levels and coverage may require redesign to reduce leakage to higher-income households. - Where significant leakage cannot be avoided due to low administrative capacity, enhancing tax capacity and tax effort will be necessary to avoid lowering benefits for low-income beneficiaries and to claw back benefits accruing to high-income households. - A comprehensive, evidence-based strategy that includes measures to improve administrative and tax capacity can help manage these trade-offs effectively. ### Structure of the paper and guidance for staff engagement - The paper is structured around key questions staff should address when engaging on SSN issues; answers help frame policy issues, identify implications, and define possible responses: - What is the nature of the current SSN system? - “Social Safety Nets: Objectives and Features” provides an overview of SSN objectives and typical components, discusses interaction across programs, and highlights key SSN design issues for discussion with authorities and development partners, including data and information gaps and labor market policy interactions. - How to assess the various channels of macro-criticality? - “Assessing the Macro-Criticality of Social Safety Net Spending” discusses spending adequacy, spending efficiency, and fiscal sustainability and how to evaluate their relevance across countries with varying SSN development. - How to effectively integrate SSN analysis into surveillance and program activities? - “Incorporating Social Safety Nets Issues into Country Work” discusses integrating macro-criticality into surveillance and program design, reflecting policy preferences and constraints, integrating SSNs into macro-fiscal frameworks, country examples, use of quantitative and structural conditionality, leveraging outside knowledge, coordinating with development partners, and communicating reform proposals to authorities. - Annexes: - Annex 1 lists internal and external resources (data sources, analytical tools, selected literature) relevant to SSN issues. - Annex 2 discusses lessons learned from the pandemic, highlighting SSN features that enhance effectiveness in dealing with temporary shocks. - Annex 3 discusses broader contributions of SSNs to inclusive growth. ### SSN objectives and features (introductory points) - The overarching objective of SSNs is to protect households from poverty and to promote their capacity to pull themselves out of poverty. - SSNs employ a range of programs and policy instruments to achieve protection and promotion objectives. - Protection role: - SSN transfers provide income support to ensure some minimum level of well-being, facilitate consumption smoothing over the life cycle (for example, child benefits or social pensions), and increase resilience to shocks (unemployment, disease, disability). *Source: tnmea2022007 - INTRODUCTION* ### BOX 1 Typical Social Safety Net Program Components ### BOX 1 Typical Social Safety Net Program Components ### Program types (enumeration) - Cash transfer programs. These programs offer periodic monetary transfers with the objective of providing regular and predictable income support to beneficiaries. This category covers a wide range of programs, including poverty-targeted cash transfers; family, children, and orphan allowances (including benefits for vulnerable children); and noncontributory funeral grants and burial allowances. This includes both conditional and unconditional cash transfer programs. - Social pensions. These are regular cash transfers provided exclusively to the elderly which, unlike contributory pensions, do not require prior contributions. Social pensions may be universal or targeted to the poor and vulnerable. - School feeding programs. These programs supply meals or snacks for children at school, including take-home food rations for children’s families. - Nutrition programs. This includes programs providing food stamps and vouchers, food distribution programs, and other nutritional programs (excluding school feeding programs). - Fee waivers and targeted subsidies. This encompasses a wide variety of targeted (as opposed to universal) subsidies focused on the poor and vulnerable, including health insurance exemptions and reduced medical fees, education fee waivers, housing subsidies and allowances, utility and electricity subsidies and allowances, agricultural input subsidies, and transportation benefits. - Emergency programs. This includes programs providing emergency support in cash and in-kind to individuals in case of emergency or in response to shocks (including support to refugees and returning migrants). Transfers are usually temporary. - Other programs. This includes other noncontributory programs intended to target the poor or vulnerable, such as programs distributing school supplies, tax exemptions, social care services, and other programs not included in the other categories. ### Roles and impacts of SSN transfers - Promotion - SSN transfers can enhance the human and physical capital of beneficiary households, supporting households in pulling themselves out of poverty and avoiding future poverty. - Access to a reliable source of income can reduce the need for precautionary savings and allow households to invest in high return but more risky activities or to search for more productive job matches. - In the face of adverse shocks, SSN transfers can reduce the need to resort to destructive coping strategies that result in a deterioration of physical and human capital and future income potential (for example, selling physical assets, withdrawing children from school, delaying essential health care, or reducing consumption of more nutritious but more expensive foods) (Annex 2). - The promotion role of SSN transfers can be enhanced through conditioning eligibility on specified behaviors, such as attendance at school or health clinics (Annex 3). Conditioning can be expected to increase demand for education and health services and basic infrastructure, reinforcing the need for coordination on policies across sectors and interactions across different elements of social spending. - SSN and promotion policies can also be used to address gender inequalities. - Protection - (Implicit in program descriptions and SSN objectives) SSNs protect households from poverty and destitution, provide temporary income support in emergencies, and reduce the likelihood of harmful coping mechanisms. ### Design, evaluation, and interactions with other programs - The design and evaluation of SSNs need to recognize multiple policy objectives and complementarities with social insurance and other social spending programs. - The appropriate design of the SSN depends on the weights a government gives to different policy objectives and the constraints it faces in designing and implementing policy options. - There is no one-size-fits-all approach; different SSN programs address different policy priorities and target different population groups. - Any evaluation of an SSN system needs to start from a clear understanding of: - the overall policy objectives of the country authorities, and - the constraints they face in designing and implementing alternative policies. - Evaluations also need to allow for complementarities with social insurance programs (such as pensions and unemployment insurance), which reduce pressure on the SSN in protecting the elderly and unemployed from poverty. - Labor market programs interact with and complement SSN programs, reinforcing protection and promotion objectives. Labor market programs provide income support to unemployed workers for a specified duration and may support individuals in finding employment and acquiring skills (Box 2). - The mix of SSN programs used in practice varies across countries and regions, reflecting factors including administrative capacity, economic structures, legacy issues, cultural differences, demographic conditions, and politics. - Example from practice: direct cash transfers account for the majority of social assistance spending in advanced economies and Europe and Central Asia, while they represent less than 40 percent of social assistance spending in the Middle East and North Africa (World Bank 2018). ### Targeting approaches and definitions - Universal transfers. Transfers available to everyone without any eligibility conditions (no targeting). While the idea of a universal (basic) income is widely discussed, no country has ever adopted it (IMF 2017b; Francese and Prady 2018; Gentilini and others 2020). - Quasi-universal (“categorical”) transfers. Transfers where eligibility is defined according to criteria typically highly (although not perfectly) correlated with having low income (for example, child benefits, social pensions, and benefits for disabled persons). All households in a given “category” receive a transfer regardless of income. - Means-tested transfers. Benefits where eligibility is based on income (or “means”), requiring the capacity to define, measure, and verify “means” (for instance, guaranteed minimum income programs typically base “means” on household income and assets). - In practice, all SSN programs involve some sort of targeting, so targeting is the norm rather than the exception. SSN programs often use a combination of targeting criteria (for example, child benefits for younger children may be universal while those for older children may be means tested). *Source: BOX 1 Typical Social Safety Net Program Components (tnmea2022007).* ### BOX 3 Alternative Approaches to Targeting ### BOX 3 Alternative Approaches to Targeting ### Targeting methods - Experience has shown that cost-effective targeting of social safety net (SSN) transfers can be achieved through a combination of targeting methods (Coady, Grosh, and Hoddinott 2004; Grosh and others 2022): - Geographic targeting. - Some programs provide benefits only to those in a defined geographic area or allocate benefits to different areas based on spatial variation in economic welfare. - Household surveys and national census data can be used to allocate transfers across regions. - Typically, this is achieved by using these data to construct a socioeconomic index for districts. For example, poverty maps are often used to estimate the share of low-income households in each region. This then provides a basis for allocating transfers to disadvantaged areas. - Self-selection targeting. - Programs have explicit design features to try to induce certain individuals to apply and others not to, promoting differential take-up across the population. - Example: public works programs may pay low wages for short periods to discourage those with better employment prospects from participating. - Programs in which lower-income households self-select into the program, while higher-income households self-select out, can substantially reduce administrative costs of targeting and leakage of benefits to higher-income groups. - Such programs typically provide low transfer levels relative to income and require households to re-apply at regular intervals, with an understanding by the population that only those in need are eligible for transfers. - Care: ensure low-income households are informed about the program and its objectives, have easy access to program offices, and that the information they are required to provide is available. - Categorical targeting. - When there is a strong correlation between relatively easy to observe individual or household characteristics and low income, this information can be used to determine eligibility. - Common categories: age, civil status, and gender. These characteristics can be used to include or exclude applicants. - Such an approach needs to be strongly founded on convincing prior empirical evidence from a recent national household survey. - Community targeting. - Information available at the community level can often be useful when identifying households in need, especially where current economic status cannot be easily captured by a more statistical approach. - This information could come from program officers who have “local knowledge” not available in any survey. - Often other prominent local persons are involved, usually in the form of a committee (for example, teachers, doctors, local elders, religious groups). - Care: ensure these persons have objectives consistent with those of the program. - Means/proxy-means targeting. - Most sizable SSN transfer programs contain some element of explicit means testing. - Simple means testing links eligibility and benefit levels to some estimate of individual or household income and requires verifying information provided by applicants on the income of household members from various sources. - More feasible in economies where economic activity is formalized and less attractive in economies where informal economic activity is prominent and verifying income is difficult. - Proxy-means testing identifies key socioeconomic characteristics strongly correlated with economic status, attaches a numerical weight to each characteristic, and calculates a score by summing the products of weights and characteristics, which is then used to determine eligibility. - Characteristics used should be easily observable and verifiable by program officers and not easily manipulated by applicants. - Typical shortcomings: exclusion of genuinely poor households and leakage of benefits to some less needy households. - Structural nature makes it more useful for dealing with “structural poverty” as opposed to “transitory” poverty. ### Benefits and costs of targeting - Benefits of targeting: - Targeting can achieve a larger poverty impact for a given transfer budget. - Particularly attractive when tax capacity is low and/or there are competing spending priorities. - Benefits increase with the extent of income inequality between poor and middle-income households. - If inequality is low, excluding “near-poor” (vulnerable) middle-income households is less desirable. - Costs of targeting: - Efficiency costs: benefits that decrease as earnings increase act as a tax on labor income and can reduce work incentives. - Administrative costs: collecting information on and verifying household income (high in developing countries with large informal sectors). - Private monetary and time costs: associated with applying for and collecting benefits. - Social costs: being identified as poor, wrongful exclusion (errors of exclusion), or eligibility criteria perceived as unclear or unfair. - Political costs: need to build broad political support for social programs. ### Considerations in choosing targeting approach - The appropriate approach to targeting of transfers will depend on how governments balance the various costs and benefits associated with different targeting options. - Decisions about whether to target, how precisely, and what method to use depend on the relative size of these costs and benefits and how they vary across targeting methods and in different country settings. - Governments might choose to broaden SSN coverage beyond the poor to reduce labor-market disincentives or cover lower-middle classes, accepting higher fiscal cost or lower benefit levels. - An evaluation of targeting needs to take account of the progressivity of tax financing: - Broader SSN coverage is less of a concern in distributional terms when tax financing is progressive since progressive taxes help to claw back benefits from higher-income households. - Example: where income (and consumption) inequality is high, substantial redistribution can be achieved even through uniform transfers financed by broad proportional consumption taxation because the share of the tax burden borne by high-income households will be substantially higher than their share in transfers (Coady and Le 2020). - Relevant for LICs that typically rely more heavily on broad consumption taxes and where capacity to implement means testing is often limited. - Reliance on tax-and-transfer schemes instead of means-tested transfers shifts inefficiency associated with financing to a different tax instrument. *Source: BOX 3 Alternative Approaches to Targeting, Technical Notes and Manuals 22/007 | 2022.* ### BOX 4 Estimating the Social Safety Net Spending Needed to Eliminate ### BOX 4 Estimating the Social Safety Net Spending Needed to Eliminate Poverty ### Concept and Methodology - Estimates typically start from the aggregate poverty gap, defined as the monetary value of the aggregate gap between the consumption (or income) of the poor and the poverty line. - Estimates are sensitive to the choice of poverty line: - Absolute poverty lines (cost of a fixed basket to meet basic needs) are used in most emerging market and developing economies; example: World Bank’s international poverty line of $1 90 a day in purchasing power parity dollars. - Relative poverty lines are used in many advanced economies; example: OECD defines poverty line as half the median household income. - Two key limitations of aggregate poverty-gap based estimates: - Most analyses use the observed poverty gap reflecting existing SSN programs, so they estimate only additional spending needs; poverty gap before existing SSN programs is seldom available and requires microdata from household surveys. - Aggregate poverty-gap estimates assume perfectly targeted means-tested transfers (all transfers go to the poor) and thus provide lower-bound estimates; realistic targeting leakage, administrative, social, political costs, and labor supply disincentives mean actual spending needs can be much higher. ### Regional Spending and Estimated Additional Needs - SSN spending levels vary considerably across countries and regions. - Advanced economies: - Spending on SSN programs and passive labor market programs averages about 2 percent of GDP. - The bulk of spending, averaging about 1.4 percent of GDP, is related to SSN programs, with family allowances accounting for about half of this. - Country examples: Canada, Finland, and France spend almost 4 percent of GDP on these policies; Lithuania, Korea, the Slovak Republic, and the United States spend less than 1 percent. - Active Labor Market Policies (ALMPs) in advanced economies: - Spending on ALMPs averages 0.3 percent of GDP. - Denmark is an outlier with ALMP spending reaching almost 2 percent of GDP. - Emerging and developing economies (EMDEs): - SSN spending in emerging and developing Europe and Latin America and the Caribbean is similar to advanced economies; substantially lower in emerging and developing Asia and sub-Saharan Africa. - Large within-region variation: example, in emerging and developing Europe Ukraine and Kosovo spend over 4 percent of GDP, Montenegro about 0.6 percent; in sub-Saharan Africa Lesotho spends more than 5 percent of GDP, while Cameroon, Guinea-Bissau, and South Sudan spend less than 0.2 percent of GDP. - Additional spending to eliminate poverty (assuming perfect targeting): - Countries in sub-Saharan Africa will need to spend about 10 percent of GDP on average, in addition to current spending. - If half of the transfer budget leaks to nonpoor households, then spending needs would be doubled. - Estimates are static and rely on current poverty rates; vulnerability and potential negative shocks can increase spending required. - Advanced economies and relative poverty: - Additional SSN spending required to eliminate relative poverty (poverty line = half median household income) and assuming perfect targeting would average about 1 percent of GDP. - Mean reported: 1.01 percent of GDP. ### Spending Efficiency and Targeting - SSN spending efficiency depends on meeting policy objectives cost-effectively without undue distortions (notably labor disincentives). - Key channels producing inefficiencies: - Targeting efficiency: errors of exclusion and leakage to nonpoor households reduce poverty impact for a given budget. Financing matters (e.g., progressive taxation can claw back transfers to high-income groups). - Administrative and implementation costs: costs for data collection, beneficiary registries, delivery infrastructure, and monitoring—can be high when programs are fragmented or duplicated. - Work disincentives: means-testing and benefit withdrawal can reduce labor supply and wages. - Targeting performance: - Advanced (high-income European) countries: on average around 28.3 percent of all SSN transfers accrue to the poorest 20 percent of the population and less than 49 percent accrue to the poorest 40 percent. - Means-tested transfers are better targeted, but only around one-third of SSN transfers in high-income European countries are means tested. - Even for means-tested transfers, in half of countries in sample, less than 50 percent of means-tested transfers accrue to the poorest 20 percent. - EMDEs: targeting efficiency varies; in half of countries in emerging and developing Asia and sub-Saharan Africa, less than 35 (55) percent of transfers accrue to the poorest 20 (40) percent of the population—close to what a universal untargeted program would deliver (20 and 40 percent, respectively). - Program-level variation in benefit-cost performance: - Conditional cash transfers tend to have higher benefit-cost ratios compared with other SSN programs. - Public work programs also show relatively high benefit-cost ratios in emerging market economies. - Opportunities: - Reallocate spending toward better-targeted programs, consolidate fragmented programs, apply well-targeted program designs more broadly, and tailor decentralization where local capacity is strong. ### Administrative Capacity, Digital Tools, and Costs - Fragmentation, duplication, and lack of coordination increase administrative costs and reduce cost-effectiveness. - Economies of scale: fixed upfront administrative costs imply larger programs often have lower per-beneficiary unit administrative costs. - Example findings referenced: guaranteed minimum income programs in Europe and Central Asia had administrative costs ~5 percent of total program budget; national social registries had unit registration costs of between 1 and 3 percent (in surveyed cases). - Beegle, Coudouel, and Monsalve (2018) found administrative costs averaged 17 percent of SSN program spending in Africa for recent, small programs. - Investment in systems (registries, eligibility verification, delivery) is required to improve coverage and reduce leakage; these investments redirect spending away from transfers but can improve targeting efficiency and program outcomes. - Use of digital tools during the pandemic: - Mobile technology, dedicated websites (examples listed), machine learning with satellite and phone record data (examples listed), and digital payment systems (mobile money) were used to expand coverage rapidly. - Trade-offs and challenges: data accuracy concerns, errors of exclusion and inclusion, digital access gaps that can exclude low-income households, and difficulties cross-checking registrations where administrative datasets are weak. - Rapid expansion versus better targeting is a key trade-off; the right mix depends on country SSN capabilities and context. ### Work Disincentives and ALMPs - Means-tested benefits can create: - Income effect: higher out-of-work income reduces work incentives. - Substitution effect: benefits tapered with income reduce returns to work. - Measured by Participation Tax Rates (PTRs) and Marginal Effective Tax Rates (METRs), disincentives depend on household composition, earnings level, benefit generosity, tapering rates, and tax system interactions. - Evidence: - PTRs and METRs vary across household types and countries and are quite high in many high-income European countries. - Empirical evidence suggests work disincentives from SSN transfers in developing countries are relatively small, reflecting low benefit levels; substantial evidence indicates positive externalities from transfers. - Policy options to manage trade-offs between poverty reduction and labor incentives: - Restrict generosity of benefits. - Taper benefit withdrawal to avoid cliff effects. - Provide additional in-work income support (wage subsidies). - Use complementary labor market activation policies, enforce conditions (job search, training), and design unemployment insurance to decline over time and motivate job search. - Consider individual unemployment savings accounts and experience rating (layoff taxes) for firms to reduce layoffs. ### Fiscal Sustainability and Financing Constraints - SSN spending is sustainable if financeable without undermining government debt sustainability or crowding out high-priority spending. - Assessment requires integrated Medium-Term Fiscal Framework (MTFF) reflecting spending pressures and revenue mobilization capacity. - Macroeconomic pressures constraining SSN fiscal space: - High debt levels and pandemic-related fiscal support: - Debt-to-GDP ratios in advanced economies averaged 82.6 percent in 2020. - Change in debt-to-GDP ratio between 2019 and 2020 averaged 12.6 percent in advanced economies and 13.1 percent in emerging market economies. - Increasing age-related spending pressures: - Government priority outlays for pensions and health care expected to increase by 1.6 percent of GDP in advanced economies and 1.8 percent of GDP in EMDEs, on average, between 2020 and 2030. - Changing nature of work could pressure contributory employment and social insurance programs. - EMDE-specific constraints: - Weak tax systems and low tax effort: - More than half of LICs, and a third of emerging market economies, have tax-to-GDP ratios below 15 percent. - International experience: increasing tax-to-GDP ratio by about 3–7 percentage points over time through comprehensive reforms is ambitious but achievable for many low-income developing countries. - Competing priority spending needs: - Meeting Sustainable Development Goals in five sectors (health, education, roads, electricity, water and sanitation) by 2030 would require increasing annual government spending on average by almost 5 and 17 percentage points of GDP in EMEs and low-income developing countries, respectively. - Mean reported (aggregate across regions): 10.17 percent of GDP for selected sectors. - Weak PFM systems require enhancements to translate policy priorities into budget allocations; credible MTFFs and medium-term revenue strategies are critical. - External financing from international financial institutions and donors may be crucial for upfront investments and temporary transfers in LICs and fragile states. - Resource-rich countries: - Need to manage volatile commodity revenues and build fiscal buffers; embedding SSN expansion in MTFFs using conservative commodity price assumptions is important. ### Incorporating Social Safety Net Issues into Country Work (Summary of Guidance) - Country reports addressing SSN issues should: - Assess macro-criticality through adequacy, efficiency, and sustainability, and explain why SSN issues are macro-critical. - Lay out key facts: SSN objectives, coverage, benefit levels, delivery modalities, financing sources, and consistency with implementation capacity and timelines. - Identify specific policy concerns linked to adequacy, efficiency, and sustainability and provide policy recommendations informed by IMF analysis and development partner expertise. - Assess macroeconomic and political implications of recommendations, including fiscal impacts and implementation realism. - Analytical steps and considerations for country teams: - Verify data availability for total SSN spending, overlaps, eligibility definitions, coverage, delivery mechanisms, and targeting methods. - Identify focus of macro-criticality tailored to country context (e.g., benefit adequacy and targeting in LICs; efficiency and sustainability in advanced economies). - Ensure scope and depth of analysis, including distributional effects, unintended consequences, interactions with tax systems, delivery methods, monitoring, and time horizon. - Clarify financing options for SSN strengthening, assess sustainability, and integrate financing into the MTFF. - Consider country-specific circumstances (development level, capacity, social preferences, political economy) and leverage collaboration with development partners and IMF functional departments. *Source: Technical Notes and Manuals 22/007 | 2022, BOX 4.* ### BOX 5 Country Experiences in Addressing Social Safety Net Issues in ### BOX 5 Country Experiences in Addressing Social Safety Net Issues in Surveillance ### Saudi Arabia 2018 Article IV Consultation (IMF 2018c) - SSN-related issues - Energy price reform and the Citizens’ Account Program (CAP) were discussed under the broad context of delivering sustainable fiscal adjustment and a strong fiscal framework. - Historically, inefficient energy and water price subsidies were a way to share oil wealth across the population and were seen as a key part of its broad social protection system. - Due to declining oil revenues and heightening fiscal pressures, Saudi Arabia started to gradually phase out energy and water subsidies and introduced cash transfer programs such as the CAP in 2018 to compensate households. - Reform recommendations - Energy price reform - Staff welcomed the authorities’ intention to continue to gradually increase energy prices to international benchmark levels by 2025. - Recommended providing more information to important stakeholders on the level and pace of future price increases to enable households and businesses to plan their adjustment. - Recommended introduction of an automatic pricing mechanisms once prices reach benchmark levels; the calculation of benchmark prices; the nature and extent of cross-subsidies in the energy sector; and the design of the CAP. - Paramount to success: strike a balance between fiscal revenues and adequate compensation to households through the CAP. - Assessment needed of CAP adequacy, coverage, and progressivity to develop the CAP into an important instrument for redistribution. - Advised that details of the CAP should be made public and broadly communicated. - To generate sustained public support for regular price changes to remove and avoid consumer subsidies, transparent reporting of subsidies given to energy suppliers was recommended. ### Malaysia 2021 Article IV Consultation (IMF 2021d) - SSN-related issues - The pandemic underscored the need to evaluate the system of social protection. - Inequality and poverty rates have declined substantially in recent decades, though they remained elevated compared to other countries in the region. - Social assistance programs covered a large share of the population, although benefit levels are small. - A significant share of workers was not covered by the unemployment insurance scheme; that share was likely to increase over time given increased incidence of temporary and gig jobs and self-employment. - Reforming the social protection system to better protect the vulnerable required additional SSN spending, highlighting the importance of creating more fiscal space. - Reform recommendations 1. Social assistance - Reduce coverage of the rich and increase benefits for the poor; adopt a more targeted approach focused on supporting the poorest members of society to better allocate limited resources and further reduce poverty and inequality. 2. Unemployment insurance - Reforms should be aligned with the latest labor market trends; ideally cover workers with temporary and gig jobs and the self-employed, and also protect them from work-related injuries. 3. Coordination - Unification, streamlining, and better coordination between programs should be considered given the number of agencies involved. - The Malaysia Social Protection Council could lead efforts to strengthen social protection (including social assistance, social insurance, labor market intervention, and management of data). 4. Financing - Given limited fiscal space, additional revenue sources would be needed in the medium term, increasing the importance of adopting a medium-term revenue strategy. - The analysis drew on work by the World Bank and others. ### Nigeria 2018 Article IV Consultation (IMF 2022f) - SSN-related issues - Income inequality and poverty rates are high in Nigeria. - Close to 63 percent of the population lives below the poverty line, and the poverty rates have declined more slowly compared to other countries. - Income inequality in 2016, as measured by both the Theil and Gini Indices, decreased from its 2013 level but remained above levels observed more than a decade ago. - Nigeria faces large development needs, including progress toward the Sustainable Development Goals in infrastructure, health, and educational attainment. - Reforms to generate fiscal space were key, including increasing value-added tax collection, excises, and electricity tariffs in a progressive manner so as to not aggravate income inequality. - To tackle increasing poverty gaps, scaling up SSN transfers and expanding their scope to cover a larger share of the poor was needed. - Several social transfer programs currently exist in Nigeria, but they are relatively small and face limitations. - Reform recommendations 1. Scale and targeting - A well-targeted and scaled-up SSN along with adequately enhanced monitoring was required. - Increased social safety transfers and augmentation of the existing lifeline tariff could help compensate the poor from measures aimed at increasing fiscal space. - Plans to expand the national cash transfer program were welcomed and should be accelerated. - Existing cash transfers could be used to target the poorest households as a mitigating measure for revenue reforms that would impact purchasing power and could increase poverty (albeit expected to decrease inequality). - As SSNs could likely not be adequately scaled up in the short term, complementary measures (lifeline tariff, increase in health and education spending) would be needed as part of the reform package. 2. Implementation - Improve implementation of existing social and employment programs at federal and state levels by expanding coverage, defining eligibility criteria more tightly, and enhancing monitoring. ### The Bahamas 2020 Article IV Consultation (IMF 2021e) - SSN-related issues - Despite a comprehensive set of programs, poverty and inequality remained elevated relative to countries with similar per capita income levels; vulnerability was high. - In 2014, about one-fifth of the population earned below US$12 4 a day (with about 5 percent living in extreme poverty, earning below $5 per day). - Several programs in place: (1) social insurance including unemployment, pension, and life-event benefits; (2) publicly funded health care insurance; (3) tuition-free education system; and (4) other social assistance programs including food support for the poor, schoolchildren, and persons with disabilities. - The pandemic led to an increase in social spending across all programs; to accommodate needed spending, authorities had postponed the public debt target by another two years. - Reform recommendations - Emphasize improving efficiency and targeting of social spending. 1. Improve social statistics and collect more household information to understand income/wealth distribution and income sources; data on socioeconomic variables at the subnational level, by island, would help assess vulnerabilities and needs. 2. Digitize key information, particularly in the health sector, to ensure an efficient and adequate health care system in the post-COVID-19 normal. - Expand telemedicine services and modernize processes for data collection, flow, storage, and analysis of health information, as suggested by the Inter-American Development Bank. 3. Institutionalize information exchange across stakeholders including the Ministry of Finance, Ministry of Social Services and Urban Development, Ministry of Health and health service providers, Ministry of Education, National Emergency Management Agency, and National Insurance Board. - Develop new statistics collection methods that allow continuation of data generation during extreme shocks such as hurricanes or the pandemic. 4. Conduct further analysis of the role of the private sector in health care delivery to avoid duplication of services. ### C IMF-Supported Programs — Design and Conditionality on SSN Issues - Engagement focus - Engagement should focus on the role of SSNs in achieving program goals; SSN reforms can directly contribute to overall program objectives and program documents should clearly establish such linkages. - Improving efficiency may require long-term administrative efforts (for example, social registries), but initial actions could have immediate tangible effects. - SSN reforms (for example, expanding existing cash transfer programs) may be needed to mitigate adverse impacts of macroeconomic adjustment on vulnerable households and to support program success and reform momentum. - Ownership and country-specific considerations - Authorities’ ownership, country-specific circumstances, and local capacity are key when including SSN reforms in a program context. - Primary responsibility for SSN objectives and design lies with the authorities; formulation of a clear strategy to strengthen the SSN reinforces ownership and political sustainability. - Identification of vulnerable segments and policy advice may vary across countries and programs. - Coordination with multilateral partners - Effective coordination with other multilateral institutions is critical to leverage technical knowledge; staff can use external analysis and expertise to improve conditionality design, though IMF remains responsible for establishing and monitoring compliance with program conditionality. - Collaboration is especially relevant in LICs and fragile and conflict-affected states where administrative capacity and fiscal space are limited and take time to build. - Conditionality modalities and principles - Conditionality on SSN reforms can be used if reforms are critical to program objectives or for monitoring program implementation; establishment of program conditionality is subject to standards in the Guidelines on Conditionality. - Types of conditionality: - Quantitative conditionality (performance criteria (PCs) and indicative targets (ITs)) are often set on general social spending that contains selected SSN expenditure. - PCs and ITs are typically set to ensure spending adequacy (for example, spending floors) or to track spending efficiency. - PCs are used for clearly specified variables or measures that can be objectively monitored and are critical for program goals; ITs are used where variables cannot be established as PCs because of substantial uncertainty about economic trends. - Coverage of SSN spending under such targets can vary by country- and program-specific priorities and data availability. - Broad coverage is appropriate where protecting all budgetary resources associated with SSN is critical; narrow focus may be effective to protect or expand key SSN programs during shocks or to focus reform on best-performing programs. - Using PCs should be avoided if there are concerns about data quality; if a country cannot effectively monitor social spending and a quantitative condition cannot be established, program documents should explain why and include capacity development measures to enhance data quality and timeliness. - Structural benchmarks (SBs) can be set for key milestones in implementing SSN reforms critical to program objectives. - Examples: develop a strategy for strengthening the SSN; introduce new SSN programs; expand coverage of existing SSN schemes; develop social registries and centralized information systems to improve SSN management and monitoring. - Where such actions require increases in SSN spending, the spending increases could be incorporated in ITs. - SSN reforms can be specified as prior actions when upfront implementation is critical for program success. - Adoption of SBs is guided by general principles of conditionality such as parsimony and criticality of meeting program objectives. - SSN measures not deemed critical can be established as commitments in the Letter of Intent and Memorandum of Economic and Financial Policies with clear timelines. - Correct sequencing may require conditionality in other areas, for example, strengthening PFM capacity before SSN reforms. - Recent trends and statistics - SSN reforms have gained increased emphasis in IMF-supported programs to support inclusive growth and protect the vulnerable during economic adjustment, often in collaboration with development partners. - Increased use of conditionality has translated into SSN-related program commitments increasingly supported by quantitative conditionality on social spending and SSN reforms. - During 2017–20, about 90 percent of Poverty Reduction and Growth Trust–supported programs included quantitative social spending conditionality (up from about 65 percent in 2012–14). - The percentage of General Resources Account–supported programs with such conditionality almost doubled over the last 10 years to 45 percent over 2017–20 (up from 20 percent over 2012–14). - Several recent programs introduced SSN conditionality to support implementation of key reforms and address economic hardship created by the COVID-19 pandemic. - Collaboration with development partners has been key in design and in supporting authorities to advance reforms associated with IMF-program conditionality. *Source: BOX 5, "Country Experiences in Addressing Social Safety Net Issues in Surveillance," tnmea2022007.* ### BOX 6 Country Experiences with Addressing Social Safety Net Issues in ### BOX 6 Country Experiences with Addressing Social Safety Net Issues in ### Ecuador 2020 Extended Fund Facility (IMF 2020b) - SSN-related issues - Ecuador faced two major challenges: addressing poverty that had increased since the onset of the COVID-19 pandemic and making fiscal consolidation socially acceptable. Both these challenges highlighted the need to fundamentally enhance the SSN. - Reform measures - Authorities, in collaboration with the World Bank, developed a strategy to expand the coverage of social assistance programs from the existing 37 percent of families in the bottom three deciles of the income distribution at the program initiation in September 2020 to 80 percent of families by December 2021. - Achieving this required upgrading the social registry. Authorities introduced measures to monitor the progress on upgrading the registry and expanding coverage (for example, operationalization of a committee in charge). - Analysis - The 2020 Extended Fund Facility (EFF) program document analyzed the gaps in the existing SSN, its social implications, and the required reforms based on the collaborative work between the World Bank and the IMF. - Conditionality - The 2020 EFF introduced quantitative and structural targets in September 2020: - Indicative targets (ITs) on the coverage of the cash transfer programs for lower-income households (number of families, floor). - Structural benchmarks (SBs) to complete the social registry upgrade and the expansion of social assistance program coverage to at least 80 percent of families in the bottom three deciles of the income distribution by December 2021. - The SB complemented the IT, helping the authorities meet the IT more effectively than under the 2019 EFF, where the social spending performance criteria were not supported by structural conditionality and were not successful in expanding SSN coverage. - Difficulties related to data collection in certain regions led to a shift of the target date of the SB to meet the 80 percent goal to April 2022 (from December 2021). ### Ukraine 2015 Extended Fund Facility (IMF 2015) - SSN-related issues - Amid the economic crisis that started in 2014, Ukraine initiated an energy price reform (with large increases in electricity and gas tariffs) to restore fiscal sustainability. Targeted expansion of the SSN was implemented to protect lower-income households from the adverse effects of this reform. - Reform measures - With the increase in tariffs, the authorities initially increased overall energy-related benefits from 1 percent of GDP in 2015 to 1¾ percent of GDP, while also enhancing income means-testing. - Authorities initiated reforms to improve targeting and ensure SSN fiscal sustainability, including adjusting the social norms for calculating utility benefits for households and eliminating redundant compensation programs. - The IMF provided extensive technical support for developing reform measures in close collaboration with development partners, including the World Bank. - Conditionality - At its second review (September 2016), the 2015 EFF introduced an SB for adjusting the parameters of the utility-related benefits to ensure their sustainability. While this could not be implemented on time, the authorities adjusted the social norms for calculating the benefits as required by a prior action during the third review. Subsequently, they implemented adjustments to the social norms. ### Madagascar 2021 Extended Credit Facility (IMF 2022g) - SSN-related issues - Despite massive demand, social spending had fallen short of targeted levels, with the social spending IT being missed repeatedly under the 2016 Extended Credit Facility (ECF). The country needed to expand SSN spending and strengthen budget execution to improve access of poor households to SSN benefits and more broadly advance the goal of poverty reduction. - Reform measures - With assistance from the World Bank, authorities started expanding the SSN, aiming to expand the coverage of cash transfer programs to 590,000 households by September 2021 from 283,428 households in December 2020. - Authorities worked to strengthen monitoring and reporting to address underexecution of broad social spending (for example, by disclosing social spending regularly and by adjusting the budget classification). - Analysis - The 2019 Article IV staff report analyzed the impediments to the effective execution of social spending (not necessarily focusing only on SSN spending). Staff engaged with the World Bank to discuss key challenges as the World Bank had been assisting the authorities in expanding the cash transfer programs. - Conditionality - The 2021 ECF adopted an SB to increase the number of beneficiaries of cash transfer programs to 540,000 in September 2021, to complement the social spending IT, which was separately introduced. - To strengthen monitoring, the ECF set a separate SB to publish quarterly budget execution reports, including on social spending, and introduced multiple indicators as memorandum items as part of the program monitoring (for example, social spending, including salaries and externally financed investments). - Authorities committed in the Memorandum of Economic and Financial Policies to adjusting the budget classification of social spending. ### Mauritania 2017 Extended Credit Facility (IMF 2017a) - SSN-related issues - The COVID-19 pandemic imposed severe hardship on Mauritania and necessitated scaling-up of targeted income support to cover the most vulnerable households. - Reform measures - Authorities committed in September 2020 to scaling up the targeted cash transfer scheme for the poor and vulnerable from 34,000 households in March 2020 to a target of 55,000 households by October 2020, and 70,000 households by end-2020. - This required expansion of both the social registry of vulnerable households and the cash transfer program to cover the whole country, with support from the World Bank. The expansion of the social registry aimed at covering 200,000 households. - Conditionality - At its fifth review (September 2020), the ECF adopted an SB to provide cash transfers to 55,000 vulnerable households by October 2020 (up from 34,000 in March 2020)—the IT on the floor for social spending was raised at the same time. - Implementation of this SB was delayed due to capacity constraints, but it was eventually completed with a modest delay by January 2021. - In the letter of intent in February 2021, authorities committed to further expanding the targeted cash transfer scheme to 100,000 households by the end-2021. ### Senegal 2020 Policy Coordination Instrument and 2021 Stand-by Arrangement and Standby Credit Facility - SSN-related issues - In Senegal, 85 percent of households are estimated to have experienced income declines due to the COVID-19 pandemic. With support from the World Bank, authorities envisaged broad financial support to the most vulnerable households, including through additional cash transfers. - Reform measures - Authorities planned to double the coverage of the Single National Register (RNU), a database supporting social protection efforts, to 1 million households. The goal was to allow rapid deployment of compensation to the poorest households suffering from shocks, including the COVID-19 pandemic. - They adopted a decree institutionalizing the RNU in August 2021 to avoid fragmentation in implementing SSN measures. - Conditionality - The 2020 Policy Coordination Instrument introduced an SB to update and extend the RNU registry by identifying vulnerable households beyond the 558,000 households already surveyed, with the goal of including at least 1 million households by end-2021. Subsequently, the target date was shifted to October 2022. - Authorities committed to institutionalize the RNU in the Memorandum of Economic and Financial Policies. - Note - Initially solo use of the Policy Coordination Instrument but since 2021 concurrent use of the Policy Coordination Instrument and Stand-by Arrangement and Standby Credit Facility (IMF 2021f). ### Dialogue with Country Authorities — Communication Considerations - General guidance - Communication of policy advice should be clearly embedded within the macrofiscal context of the country. - Country teams typically engage on SSN issues from some combination of three macro-critical perspectives: fiscal sustainability, spending adequacy, and spending efficiency. - Advice should explicitly recognize trade-offs and that the appropriate choice of reforms reflects government preferences and constraints. - Policy advice should help authorities develop their own communication efforts, focusing on underlying motivations for reform and its benefits. - Messaging priorities when SSN reforms are to reduce leakage and improve targeting - Emphasize benefits of reducing leakage to higher-income households and avoiding errors of exclusion. - Highlight that improvements in targeting efficiency can lead to improvements in benefit levels for other beneficiaries and in coverage of the poor and most vulnerable. - Note that targeting efficiency can create additional fiscal space to address other spending needs and reduce high tax rates where deemed excessive. - Suggest enhancing progressivity of financing (for example, through increasing progressive income taxes or reducing regressive tax expenditures) to strengthen overall targeting efficiency. - Messaging when SSN reform is motivated by fiscal pressures - Explain reforms in terms of trade-offs within government financing capacity. - Communicate that reforms focus on reducing leakage to higher-income households while addressing gaps for protecting more vulnerable households (for instance, increasing the use of means testing in place of universal categorical transfers). - Emphasize that such reforms help protect other priority spending during fiscal consolidation, such as education and health spending. - Use communication to clarify the opportunity cost of “no policy reforms.” ### BOX 7 — Selected Examples of Communicating Policy Advice to Country Authorities - Ecuador (2020) (IMF 2020c) - SSN reform was a main pillar of the IMF extended arrangement under the EFF approved by the Executive Board in October 2020, resulting from extensive analysis by IMF staff with the World Bank and open dialogue with authorities. - IMF and World Bank collaboration: - Analyzed current SSN programs, including coverage and benefit levels across different deciles. - Helped identify barriers to expanding coverage of better targeted SSN programs. - Emphasized importance of coordination between Ministry of Finance and different government entities related to SSN. - Supported authorities in preparing an action plan with detailed steps and deadlines; action plan was part of IMF EFF conditionality approved in March 2019. - Designed a strategy to expand the social registry and gradually increase coverage, reflected in IMF conditionalities approved in October 2020. - Highlighted importance of communicating the role of these reforms for achieving social and economic objectives (alleviating poverty, increasing household resilience to shocks, mitigating adverse effects of growth-friendly reforms). - Colombia (2019) (IMF 2019f) - Energy subsidy reform as a key pillar of national development plan; IMF technical assistance helped develop the case for subsidy reform combined with a strategy to strengthen the SSN. - Report provided: - Estimates of the high fiscal cost of fuel and electricity subsidies. - Distributional analysis of subsidies showing regressive effects. - Analysis of potential impact of reforms on the poor and most vulnerable. - Recommendations to strengthen communication with the general public (for instance, creation of a dedicated communication unit). - France (2018) (IMF 2018d) - Staff emphasized need to communicate specific reforms early and implement them firmly to support credibility of fiscal strategy. - Analysis showed scope for improving targeting efficiency of SSN spending while allowing SSN to expand coverage rapidly in response to shocks. - Suggested efficiency savings by addressing fragmentation of social programs across different government levels. - Ukraine (2015) (IMF 2015) - IMF engagement over the last decade, especially around energy subsidy reform, emphasized continuous and flexible engagement and strengthening SSN to mitigate impacts on the most vulnerable. - IMF and World Bank analysis provided essential inputs to government reform strategy and communication to stakeholders. - Cyprus (2013) (IMF 2013) - In response to the financial crisis, IMF supported introduction of a well-targeted guaranteed minimum income scheme: - Helped define the minimum consumption basket. - Emphasized refining costing and coverage of the scheme to facilitate consolidation of fragmented and duplicating poverty alleviation schemes. - Emphasized need for a comprehensive database and IT requirements to administer the reformed welfare system. - Supported improved coordination between Ministry of Finance and Ministry of Labour and Social Insurance. - Recommended explicitly incorporating measures to strengthen the SSN into the Memorandum of Economic and Financial Policies and as program conditionality through a structural benchmark. *Technical Notes and Manuals 22/007 | 2022 — BOX 6 content unit* ### ANNEX 1 INTERNAL AND EXTERNAL RESOURCES SUPPORTING ### ANNEX 1 INTERNAL AND EXTERNAL RESOURCES SUPPORTING ANALYTICAL WORK AND POLICY ENGAGEMENT ### Internal resources: publications, COVID series, and support - Staff can rely on internal analytical papers, toolkits, and Fiscal Affairs Department contacts to identify SSN experts at development partners and to assist nonspecialist staff. - Fiscal Affairs Department support modalities: - Ad hoc consultation. - Desk studies. - Technical assistance reports. - Key IMF books, papers, and notes listed: - Book: Inequality and Fiscal Policy (September 2015) - Fiscal Monitor: Tackling Inequality (October 2017) (IMF 2017b) - Fiscal Monitor: A Fair Shot (April 2021) - Fiscal Monitor: Fiscal Policy from Pandemic to War (April 2022) (IMF 2022b) - Working Paper: Universal Basic Income: Debate and Impact Assessment (December 2018) - Working Paper: Fiscal Redistribution and Social Welfare (March 2019) - Working Paper: Guaranteed Minimum Income Schemes in Europe: Landscape and Design (July 2021) (Coady and others 2021) - Policy Paper: A Strategy for IMF Engagement on Social Spending (June 2019) (IMF 2019a) - Guidance Note: IMF Engagement on Social Safeguards in Low-Income Countries (June 2018) (IMF 2018b) - Designing Fiscal Redistribution: The Role of Universal and Targeted Transfers (June 2020) - COVID Series Notes: - Digital Solutions for Direct Cash Transfers in Emergencies (April 2020) (IMF 2020d) - Managing the Impact on Households: Assessing Universal Transfers (April 2020) (IMF 2020e) - Reaching Households in Emerging and Developing Economies: Citizen ID, Socioeconomic Data, and Digital Delivery (April 2020) (IMF 2020f) - Government Support to Business and Households (May 2020) (IMF 2020g) - Enhancing Digital Solutions to Implement Emergency Responses (June 2020) (IMF 2020h) - Mobile Money in the COVID-19 Pandemic (October 2020) (IMF 2020i) - Analytical toolkits for initial assessments: - Social Protection and Labor Assessment Tool: - Assists assessment of poverty and inequality, spending adequacy and efficiency of SSN systems and the labor market. - Offers choice of target countries and comparator groups. - Provides an overview of overall SSNs; not a substitute for in-depth analyses. - Expenditure Assessment Tool (EAT): - Provides information to assess public expenditures, including social income support. - Excel-based, user-friendly, offers choice of target countries and comparator groups. - Serves as a starting point for more detailed sectoral analysis; not a substitute for an in-depth spending review. - Training and capacity building: - IMF staff provides periodic internal training on SSNs. - Capacity Development Talk: Capacity Development Talk: The IMF’s Engagement on Social Protection (IMF 2021g) ### External resources: reports, design guidance, and coordination mechanisms - Development partners and multilaterals provide descriptive information and design guidance; key reports and thematic inputs include: - The State of Social Safety Nets Report (World Bank 2018) - World Social Protection Report 2020–22: Social Protection at the Crossroads—In Pursuit of a Better Future (ILO 2021a) - The State of Economic Inclusion (World Bank 2021) - Examines more than 200 programs in 75 countries. - Finds economic inclusion programs reach approximately 20 million households and benefit 92 million individuals. - UNICEF Social Protection Framework (UNICEF 2019) - Revisiting Targeting in Social Assistance (Grosh and others 2022) - Adaptive Social Protection: Building Resilience to Shocks (World Bank 2020) - Realizing the Full Potential of Social Safety Nets in Africa (World Bank 2018) - Protecting All: Risk-Sharing for a Diverse and Diversifying World of Work (World Bank 2019b) - For Protection and Promotion: The Design and Implementation of Effective Safety Nets (World Bank 2008) - Interagency and knowledge platforms: - ILO Webpage on Social Protection. - The World Bank Webpage on SSNs. - UNICEF Webpage on Social Protection. - Socialprotection.org: member-based knowledge-sharing and capacity-building platform. - Social Protection Inter-agency Cooperation Board: coordination mechanism composed of representatives of international organizations and bilateral institutions. ### Relevant data sources and microsimulation tools - Major data compilations and tools for SSN analysis: - World Bank Atlas of Social Protection Indicators of Resilience and Equity (ASPIRE): - Provides indicators for 139 countries on social assistance, social insurance, and labor market programs. - ILO World Social Protection Database: - Collects comparable statistical data on social security worldwide from government administrative data and Social Security Inquiry questionnaires. - European System of Integrated Social Protection Statistics (ESSPROS): - Framework for international comparison of administrative national data on social protection benefits and financing. - OECD Social Spending Database: - Statistics on public and private social expenditure at program level and net social spending indicators for OECD countries. - OECD Poverty Database: - Data on poverty gaps, poverty rates, and income inequality for OECD countries. - OECD Household Distributional Results in Line with National Accounts, Experimental Statistics: - Distributional results on income, consumption, and savings aligned with national accounts. - PovcalNet database: - Poverty measures for developing countries. - Euromod Tax-benefit Microsimulation Model for European Union Countries: - Calculates effects of taxes and benefits on household incomes and work incentives for EU countries. - Southmod Tax-benefit Microsimulation Model for Selected Developing Countries: - Calculates effects of taxes and benefits on household incomes and work incentives for selected developing countries. - LIS (Luxembourg Income Study and Luxembourg Wealth Study Databases): - Harmonized income, wealth, employment, and demographic data for cross-national comparisons. - IMF Climate Change Indicators Dashboard: - Presents mean surface temperature change during 1961 to 2020, using 1951–1980 as a baseline; staff can explore these data to study SSN issues in the context of climate change. ### Practical lessons and operational features for SSNs from recent experience - Role of SSNs in household resilience: - SSNs and labor market policies protect poor and vulnerable households from short-term and long-term adverse consequences of shocks, including sharp increases in food and energy prices. - SSN cash transfers can support preparedness (for example, saving), adaptation (for example, investing in less risky assets), and coping (avoiding destructive coping strategies). - Labor market informality and the primacy of SSNs in EMDEs: - In many EMDEs, high labor market informality limits coverage of contributory unemployment income support schemes; SSNs are the main instrument to provide income support during crises. - In advanced economies and some emerging economies with large formal sectors, pandemic-related measures often strengthened social insurance and expanded eligibility. - Pandemic responses and implications: - Advanced economies: strengthened labor market and social insurance programs, expanded eligibility, increased benefit levels, extended paid leave, and introduced or expanded employment retention schemes. - EMDEs with sufficient capacity: scaled up SSN programs, expanding coverage and increasing benefit levels; relatively generous cash transfers were commonly used. - EMDEs with weak SSN systems: faced difficulties expanding coverage and reaching vulnerable households due to limited administrative capacity and infrastructure. - Technological innovations and trade-offs during the pandemic: - Techniques used to expand coverage: mobile-based registration, dedicated websites, phone records, satellite data, and machine learning algorithms (examples cited: Togo, Nigeria, Brazil, Indonesia, Thailand). - Digital payment systems (especially mobile money) reduced operational costs and increased access. - Risks and limitations: - Potential exclusion of low-income households without access to digital tools. - Potential leakage to households not in need due to less reliable data sources. - Larger fiscal costs if coverage expansions persist without adequate cross-checks and progressive taxation. - Features required for SSNs to play an effective stabilization role: - Strong information systems: - Universal and robust identification systems. - Ability to collect and verify socioeconomic information (for example, integrated social registries with verifiable information on household characteristics, employment, and income). - Strong implementation capacity: - Ability to deliver benefits reliably and timely to intended beneficiaries. - Strong institutional arrangements: - National policies, strategies, and laws; clear roles and responsibilities; coordination mechanisms. - Fiscal considerations: - Building fiscal space is essential to enable countries to scale up SSN coverage and benefits without undermining fiscal sustainability and macroeconomic stability. - A medium-term fiscal framework (MTFF) that reflects other spending needs and revenue mobilization capacity facilitates building fiscal buffers, strengthening fiscal capacity via credible tax and spending reforms, and withdrawing discretionary measures as the economy recovers. *Source: ANNEX 1 INTERNAL AND EXTERNAL RESOURCES SUPPORTING ANALYTICAL WORK AND POLICY ENGAGEMENT (Technical Notes and Manuals 22/007 | 2022).* ### ANNEX 3 SOCIAL SAFETY NETS AND ECONOMIC GROWTH ### ANNEX 3 SOCIAL SAFETY NETS AND ECONOMIC GROWTH ### Overview - Large and persistent inequalities can jeopardize sustained economic growth by undermining the ability of the poor and most vulnerable to invest in human and physical capital (Cingano 2014). - Evidence suggests high income inequality has a sizable negative impact on economic growth through hindering investment in human capital and limiting innovation and technology diffusion (Lucas 1988; Sala-i-Martin, Doppelhofer, and Miller 2004; International Labour Organization 2011; Organisation for Economic Co-operation and Development 2015; Maradana and others 2017). - Redistributive public policies, including social safety net (SSN) transfers, can reduce inequality, enhance access to opportunity, increase intergenerational mobility, and support sustained inclusive growth (Ostry, Berg, and Tsangarides 2014; UNICEF 2021). ### Channels through which SSN programs can promote economic growth (OECD 2019) - Alleviating credit constraints of low-income households. - Helping households cope with risks and protecting consumption and assets from adverse shocks. - Changing household resource allocation, affecting education investments, labor allocation, and migration decisions. ### Micro-level impacts of SSN programs - Human capital accumulation: - SSN transfers can ameliorate credit constraints on investments in children’s health and education. - Conditional cash transfer programs in Bangladesh, Brazil, Indonesia, Jamaica, Mexico, and South Africa have evidence of increased school enrollment and attendance (Bastagli and others 2016; Parker and Todd 2017). - Even without conditionalities, SSN programs can reduce liquidity constraints and foster human capital investments. - Higher educational attainment increases future labor market opportunities (Parker and Vogl 2018) and contributes to economic growth (Angrist and others 2021). - Cash transfers can reduce destructive coping strategies after shocks, such as withdrawing children from school, delaying essential health care, or reducing consumption of more nutritious but more expensive foods (de Janvry and others 2006). - Accumulation of productive assets and innovation: - SSN programs can enable accumulation of productive assets by providing assets directly, supporting investment, or increasing access to credit (Independent Evaluation Group 2011; Barrientos 2012; Bastagli and others 2016). - Long-term and predictable cash transfers reduce the risk of innovative, high-return livelihood investments and help prevent loss of productive capital following shocks (Devereux and others 2005; Berhane and others 2011). - Labor market participation: - Cash transfers targeted to the poor can potentially reduce labor supply through income and substitution effects; withdrawal of benefits with income can act like a labor income tax (Moffitt 2002; Borjas 2005; Meghir and Phillips 2010). - Conditionalities (mandated job search, acceptance of employment offers, participation in active labor market programs) can attenuate work disincentives. - Empirical literature on cash transfers in developing countries shows little evidence of work disincentives; recipients have increased job-seeking efforts and migration, increasing employment (Banerjee and others 2017; Samson 2009). ### Community and national level impacts - Accumulation of productive community assets: - Public works programs can increase community assets (for example, roads, irrigation) that raise productivity and market access (Mvukiyehe 2018). - Rigorous studies on the impact of public works programs on economic growth are scarce. - Potential effects of public investment on growth can be offset if the investment is not sustainably financed (Barrientos 2012; Bastagli and others 2016). - Multiplier effects: - If SSN cash transfers are large enough, increased aggregate demand can generate multiplier effects from increased local consumption and production, providing macroeconomic stimulus and supporting short-term growth. - Recent research finds evidence that SSN transfers and unemployment benefits can have large multiplier effects, increasing local aggregate employment, consumption, and output in EMDEs and advanced economies (Egger and others 2019; Gerard, Naritomi, and Silva 2021; di Maggio and Kermani 2016; Pennings 2020; Hellwig 2021). ### Instrumental roles of SSN programs in supporting inclusive growth - Facilitating economic reforms: - SSN programs can help governments mobilize public support for growth-enhancing structural reforms (for example, energy subsidy, tax, and labor market reforms). - SSNs can mitigate the impact of subsidy reforms on the poor and most vulnerable and help mobilize public support for subsidy removal and price liberalization. - Enhancing social cohesion: - SSN programs can enhance social cohesion and strengthen the social contract between state and citizen, which literature suggests favors investment. - There is little evidence on the impacts of SSN programs on state-building and social cohesion (Babajanian 2012; Carpenter, Slater, and Mallett 2012). *Source: ANNEX 3 SOCIAL SAFETY NETS AND ECONOMIC GROWTH, tnmea2022007* ### REFERENCES ### REFERENCES ### Academic and policy studies on social protection, cash transfers, and labor markets - Aiken, Emily, Suzanne Bellue, Dean Karlan, Chris Udry, and Joshua E. Blumenstock. 2022. “Machine Learning and Phone Data Can Improve Targeting of Humanitarian Aid.” Nature 603: 864–70. - Angrist, Noam, Simeon Djankov, Pinelopi K. Goldberg, and Harry A. Patrinos. 2021. “Measuring Human Capital Using Global Learning Data.” Nature 592: 403–08. - Babajanian, Babken. 2012. Social Protection and Its Contribution to Social Cohesion and State Building. London: ODI. - Banerjee, Abhijit V., Rema Hanna, Gabriel E. Kreindler, and Benjamin A. Olken. 2017. “Debunking the Stereotype of the Lazy Welfare Recipient: Evidence from Cash Transfer Programs.” The World Bank Research Observer 32 (2): 155–84. - Barrientos, Armando. 2012. “Social Transfers and Growth: What Do We Know? What Do We Need to Find Out?” World Development 40 (1): 11–20. - Bastagli, Francesca, Jessica Hagen-Zanker, Luke Harman, Valentina Barca, Georgina Sturge, and Tanja Schmidt, with Luca Pellerano. 2016. “Cash Transfers: What Does the Evidence Say? A Rigorous Review of Impacts and The Role of Design and Implementation Features.” ODI in collaboration with Oxford Policy Management, OPM, London. - Beegle, Kathleen, Aline Coudouel, and Emma Monsalve. 2018. Realizing the Full Potential of Social Safety Nets in Africa. Washington, DC: The World Bank Group. - Berhane, Uush, John F. F. Hoddinott, Neha Kumar, and Alemayehu Seyoum Taffesse. 2011. “The Impact of Ethiopia’s Productive Safety Nets and Household Asset Building Programme: 2006-2010.” International Food Policy Research Institute, Washington, DC. - Blanchard, Olivier, and Jean Tirole. 2004. “The Optimal Design of Unemployment Insurance and Employment Protection. A First Pass.” NBER Working Paper 10443, National Bureau of Economic Research, Cambridge, MA. - Borjas, George J. 2005. Labor Economics, eighth edition. New York: McGraw Hill. - Bosch, Mariano, and Marco Manacorda. 2012. “Social Policies and Labor Market Outcomes in Latin America and the Caribbean: A Review of the Existing Evidence.” CEP Occasional Paper CEPOP32, Center for Economic Performance, London. - Bowen, Thomas, Carlo del Ninno, Colin Andrews, Sarah Coll-Black, Ugo Gentilini, Kelly Johnson, Yasuhiro Kawasoe, Adea Kryeziu, Barry Maher, and Asha Williams. 2020. Adaptive Social Protection: Building Resilience to Shocks. Washington: The World Bank Group. - Caldés, Natalia, David Coady, and John A. Maluccio. 2005. “The Cost of Poverty Alleviation Transfer Programs: A Comparative Analysis of Three Programs in Latin America.” Economic and Sector Study Series, Inter-American Development Bank, Washington, DC. - Card, David, Jochen Kluve, and Andrea Weber. 2017. “What Works? A Meta Analysis of Recent Active Labor Market Program Evaluations.” Journal of the European Economic Association 16 (3): 894–931. - Carpenter, Samuel, Rachel Slater, and Richard Mallett. 2012. “Social Protection and Basic Services in Fragile and Conflict Affected Situations.” Working Paper 8, ODI, London. - Cingano, Federico. 2014. “Trends in Income Inequality and its Impact on Economic Growth.” OECD Social, Employment and Migration Working Paper 163, OECD Publishing, Paris. - Coady, David, Margaret E. Grosh, and John Hoddinott. 2004. Targeting of Transfers in Developing Countries: Review of Lessons and Experience. Washington, DC: The World Bank Group. - de Janvry, Alain, Frederico Finan, Elisabeth Sadoulet, and Renos Vakis. 2006. “Can Conditional Cash Transfer Programs Serve as Safety Nets in Keeping Children at School and from Working When Exposed to Shocks?” Journal of Development Economics 79: 349–73. - Devereux, Stephan, Jenni Marshall, Jane MacAskill, and Larissa Pelham. 2005. “Making Cash Count: Lessons from Cash Transfer Schemes in East and Southern Africa for Supporting the Most Vulnerable Children and Households.” Institute of Development Studies, University of Sussex, Brighton. - Drèze, Jean, and Amartya Sen. 1991. Hunger and Public Action. Oxford: Clarendon Press Publication. - Egger, Dennis, Johannes Haushofer, Edward Miguel, Paul Niehaus, and Michael W. Walker. 2019. “General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya.” NBER Working Paper 26600, National Bureau of Economic Research, Cambridge, MA. - Gentilini, Ugo, Margaret Grosh, Jamele Rigolini, and Ruslan Yemtsov. 2020. Exploring Universal Basic Income. A Guide to Navigating Concepts, Evidence, and Practices. Washington, DC: The World Bank Group. - Gerard, François, Joana Naritomi, and Joana Silva. 2021. “Cash Transfers and Formal Labor Markets: Evidence from Brazil.” Policy Research Working Paper 9778, The World Bank Group, Washington, DC. - Grosh, Margaret, Carlo del Ninno, Emil Tesliuc, and Azedine Ouerghi. 2008. For Protection and Promotion: The Design and Implementation of Effective Safety Nets. Washington, DC: The World Bank Group. - Grosh, Margaret, Phillippe Leite, Matthew Wai-Poi, and Emil Tesliuc. 2022. Revisiting Targeting in Social Assistance: A New Look at Old Dilemmas. Human Development Perspectives. Washington, DC: The World Bank Group. - Handa, Sudhanshu, Silvio Daidone, Amber Peterman, Benjamin Davis, Audrey Pereira, Tia Palermo, and Jennifer Yablonski. 2018. “Myth-Busting? Confronting Six Common Perceptions about Unconditional Cash Transfers as a Poverty Reduction Strategy in Africa.” The World Bank Research Observer 33 (2): 259–98. - Hellwig, Klaus-Peter. 2021. “Supply and Demand Effects of Unemployment Insurance Benefit Extensions: Evidence from U.S. Counties.” IMF Working Paper 21/070, International Monetary Fund, Washington, DC. - Hijzen, Alexander, and Danielle Venn. 2011. “The Role of Short-Time Work Schemes during the 2008-09 Recession.” OECD Social, Employment and Migration Working Paper 115, OECD Publishing, Paris. - Independent Evaluation Group. 2011. Evidence and Lessons Learned from Impact Evaluations on Social Safety Nets. Washington, DC: The World Bank Group. - International Labour Organization (ILO). 2011. 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Pradhan, Saurav Dash, Kunal Gaurav, Manju Jayakumar, and Debaleena Chatterjee. 2017. “Does Innovation Promote Economic Growth? Evidence from European Countries.” Journal of Innovation and Entrepreneurship 6 (1): 1–13. - Meghir, Costas, and David Phillips. 2010. “Labor Supply and Taxes.” In Dimensions of Tax Design volume one of the Mirrlees Review, edited by Stuart Adam, Tim Besley, Richard Blundell, Stephen Bond, Robert Chote, Malcolm Gammie, Paul Johnson, Gareth Myles, and James M. Poterba. London: Institute for Fiscal Studies. - Moffitt, Robert A. 2002. “Welfare Programs and Labor Supply.” In Handbook of Public Economics, 2393–430. Amsterdam: Elsevier. - Morley, Samuel, and David Coady. 2003. From Social Assistance to Social Development: Targeted Education Subsidies in Developing Countries. Washington: Center for Global Development, International Food Policy Research Institute. - Mvukiyehe, Eric. 2018. “What Are We Learning about The Impacts of Public Works Programs on Employment and Violence? Early Findings from Ongoing Evaluations in Fragile States.” The World Bank Group, Washington, DC. - Ostry, Jonathan David, Andrew Berg, and Charalambos G. Tsangarides. 2014. “Redistribution, Inequality, and Growth.” IMF Staff Discussion Note 14/02, International Monetary Fund, Washington, DC. - Parker, Susan, and Tom Vogl. 2018. “Do Conditional Cash Transfers Improve Economic Outcomes in the Next Generation? Evidence from Mexico.” NBER Working Paper 24303, National Bureau of Economic Research, Cambridge, MA. - Parker, Susan W., and Petra E. Todd. 2017. “Conditional Cash Transfers: The Case of Progresa/Oportunidades.” Journal of Economic Literature 55 (3): 866–915. - Pennings, Steven. 2020. “Cross-Region Transfers in a Monetary Union: Evidence from the U.S. and Some Implications.“ Policy Research Working Paper 9244, The World Bank Group, Washington, DC. - Razavi, Shahra, Christina Behrendt, Valeria Nesterenko, Ian Orton, Celine Peyron Bista, Alvaro Ramos Chavez, Helmut Schwarzer, Maya Stern-Plaza, and Veronika Wodsak. 2022. “Building Universal Social Protection Systems for All: What Role for Targeting?” - Rozenberg, Julie, and Stephane Hallegatte. 2015. “The Impacts of Climate Change on Poverty in 2030 and The Potential from Rapid, Inclusive, and Climate-Informed Development.” World Bank Policy Research Working Paper 7483, The World Bank Group, Washington, DC. - Sala-i-Martin, Xavier, Gernot Doppelhofer, and Ronald I. Miller. 2004. “Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach.” The American Economic Review 94 (4): 813–35. - Samson, Michael. 2009. “Social Cash Transfers and Employment: A Note on Empirical Linkages in Developing Countries.” OECD Publishing, Paris. - Tesliuc, Emil, Lucian Pop, Margaret Grosh, and Ruslan Yemtsov. 2014. “Income Support for the Poorest A Review of Experience in Eastern Europe and Central Asia”. The World Bank. - United Nations Children’s Fund (UNICEF). 2019. “UNICEF's Global Social Protection Programme Framework.” Social Inclusion and Policy 19/003, UNICEF, New York. - United Nations Children’s Fund (UNICEF). 2021. “Strengthening the Evidence on the Correlation between Fiscal Equity and Social Outcomes for Children.” Research Note, UNICEF, New York. ### Methodology, data, and measurement - Akitoby, Bernardin, Jiro Honda, Hiroaki Miyamoto, Keyra Primus, and Mouhamadou Sy. 2019. “Case Studies in Tax Revenue Mobilization in Low-Income Countries.” IMF Working Paper 19/104, International Monetary Fund, Washington, DC. - Card, David, Jochen Kluve, and Andrea Weber. 2017. “What Works? A Meta Analysis of Recent Active Labor Market Program Evaluations.” Journal of the European Economic Association 16 (3): 894–931. - Organisation for Economic Co-operation and Development (OECD). 2001. “Glossary of Statistical Terms.” OECD Publishing, Paris. - International Labour Organization (ILO). n.d. “ILO World Social Protection Database (WSPDB).” ILO World Social Protection Data Dashboards, International Labour Organization, Geneva. ### Climate, inequality, and inclusive growth - Cingano, Federico. 2014. “Trends in Income Inequality and its Impact on Economic Growth.” OECD Social, Employment and Migration Working Paper 163, OECD Publishing, Paris. - Organisation for Economic Co-operation and Development (OECD). 2017. “Climate Change and Social Inequality.” UN Department of Economic and Social Affairs Working Papers, OECD Publishing, Paris. - Organisation for Economic Co-operation and Development (OECD). 2019. “Measuring the Impact of Social Protection on Inclusive Growth.” In Can Social Protection Be an Engine for Inclusive Growth? Paris: OECD Publishing. - Rozenberg, Julie, and Stephane Hallegatte. 2015. “The Impacts of Climate Change on Poverty in 2030 and The Potential from Rapid, Inclusive, and Climate-Informed Development.” World Bank Policy Research Working Paper 7483, The World Bank Group, Washington, DC. - International Monetary Fund (IMF). 2019b. “How to Mitigate Climate Change.” Fiscal Monitor. Washington, DC, October. ### OECD, World Bank, and multilateral publications on social protection and recovery - Organisation for Economic Co-operation and Development (OECD). 2020. Development Co-operation Report 2020: Learning from Crises, Building Resilience. Paris: OECD Publishing. - Organisation for Economic Co-operation and Development (OECD). 2021a. “Designing Active Labour Market Policies for the Recovery.” OECD Policy Responses to Coronavirus (COVID-19), OECD Publishing, Paris. - Organisation for Economic Co-operation and Development (OECD). 2021b. “Scaling up Policies that Connect People with Jobs in the Recovery from COVID-19.” OECD Policy Responses to Coronavirus (COVID-19), OECD Publishing, Paris. - World Bank. 2008. For Protection and Promotion: The Design and Implementation of Effective Safety Nets. Washington, DC: The World Bank Group. - World Bank. 2018. The State of Social Safety Nets 2018. Washington, DC: The World Bank Group. - World Bank. 2019a. “The World Development Report (WDR) 2019: The Changing Nature of Work.” The World Bank Group, Washington, DC. - World Bank. 2019b. “Protecting All: Risk Sharing for a Diverse and Diversifying World of Work.” The World Bank Group, Washington, DC. - World Bank. 2020. 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