Social protection financing in the wake of COVID-19 and beyond

Social protection financing in the wake of COVID-19 and beyond

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Good morning, good afternoon and good evening,   everyone. This   is the webinars series on COVID-19  social protection responses   on behalf of GIZ and I'm working as an independent  consultant and in the field of social protection.   The reason why you see me here today and  not see [inaudible] Sylas as a moderator   or as announced yesterday, Selwyn Jehoma as  a moderator is that Selwyn is having some   connection problems at the moment. And he was  jumping in for Sylas who felt sick yesterday. So  

we had some very last minute changes which was a  challenge for us but, we are very happy that, we   can now host this webinar and have a discussion.  We also lost ILO on the very last minute,   they were also previously announced as panellists,  but due to other urgent issues, we also couldn't   get anyone from ILO at the moment for giving an  input to fiscal space for social protection. But   I hope that we can catch up on this topic later  on and also have a separate maybe webinar on this   or a separate discussion online on this topic. I'm going to share my slides with you now.   This is the 8th webinar of the social protection  responses to COVID-19 webinar's series.   And as you all might know already is that the  series is a joint effort initiated by IPC-IG,   GIZ on behalf of the German Federal Ministry  of Economic Development Cooperation and the   Australian Government Department of Foreign  Affairs and Trade, DFAT, in collaboration with the platform and in cooperation  with partners from different organizations.  

The webinars series is part of an initiative with  two other major components collaborative mapping   of country news and documents disseminated  weekly through a dedicated newsletter,   as well as an online community on the topic to  systematize information and foster discussion.   You can join this online community online  and can learn more about the whole initiative   and find out how to collaborate and  keep up updated on future webinars.   I also have to announce, one of the future  webinars, which is taking place next week on   Tuesday, the 12th of May, is about Universal  Health Coverage and the Coronavirus crisis,   challenges and responses maintaining essential  health services, and it will be hosted by UNICEF   and other partners who are going to join. So register for this webinar and to join us   next week, as well. So I'm going to shortly  introduce the panelists and the discussants of   today's webinar. We have, first of all, and maybe  the [inaudible] also switch on her camera or has  

it switched on already? We have the panelist from  IMF, Delphine Juliette Prady, she is the economist   at the Fiscal Affairs Department of the IMF. Sorry. And it's mostly working on expenditure   policy issues with a focus on social spending and  energy subsidies. She is a graduate from the Ecole   Normale Superieure in Cachan and holds a doctorate  from the Toulouse School of Economics in France.   Then a second panelist or is it discussant. We  have Mark Blecher, he s the Chief Director of   Health and Social Development of the  National Treasury of South Africa.  

He holds a PhD in Health Economics, and a  degree in Community Public Health and from the   University of Cape Town. So very happy to have  you on board as well Mark, I'm looking forward   to the discussion. Then also from the National  Treasury of South Africa, we have Lindi Mzankomo.   She's a Senior Budget Analyst in the Public  Finance Division of the National Treasury of   South Africa. And her main focus is on social  assistance. She was mainly responsible, or her   responsibilities include budget, allocation,  recommendations and analysis, monitoring   expenditure and supporting [inaudible] social  assistance, policy development, and costing.   She is a graduate from the  University of KwaZulu-Natal   with honors in economics and plan to, to further  study soon. So good luck with that Lindy as well.  

And yeah. This would have been our  original moderator who, as I said,   has some technical issues and could not join  very last minute. So I'm your moderator.   As I said, it's me, I'm Martina [inaudible]  Social Protection Consultant. And here  

on behalf of GIZ, I'm representing  the German Development Cooperation.   I quickly and shortly want to give a  let's say an overview, how we are framing   this whole webinar. I'm not sure if my slides are  really showing up when I want them to show up.   One minute I just have to...   I only have one. I'm not sure.  

Martina, you know what, the slides were  not going through when you were talking.   Karine is controlling those slides now,  so she will pass the slides for you.   Okay. Yeah. I'm very sorry for that. These  are the technical issues that are usually   happen during these webinars all the time. So Karine is going to share the slides for me now.   I think, we can just continue here.  Before I'm handing over to our panelists,  

I wanted to just give a short framing of the  topic on social protection financing within   this whole webinars series. And I want to   build up on what was presented during  the second webinar of the series. And   I'm looking into what Valentina presented. If  we could have a look at the next slide, please.   As we heard during the second  webinars, there are two key features   of shock responsive social protection systems of  social protection responses that we can give to   a crisis like this, to the COVID-19 crisis, but also to other crisis. One feature is system   and program resilience, and the other feature is  system and program adaptation. And I just want   to give a quick, let's say insight in what this  actually means for social protection financing.  

Resilience is that countries have to make sure  that the existing systems and programs won't   collapse, which will require some changes  to routine design and implementation.   Whereas the term adaptation in this regard means  that countries have to adapt their programs to   cover change contexts needs either via existing  or also via completely new programs that ideally   build on existing systems. So how does this  actually translate into social protection   financing? When we have a look at the next slide?   I'm going to first look into social  protection financing with regard to   system and program adaptation. When we  talk about social protection financing   and system and program adaptation, the overall  question would be. What financing modalities are  

actually in place and how can they be extended to  cover the extended benefits that we need to cover   the additional caseloads that we have to cover. And also the increased services that we want to   provide to the effected population groups.  So how can all this be financed? How can we   find the fiscal space for that? And which  financing options do we have? This would   be the questions that we can frame when it  comes to programs and systems adaptation,   whereas in the next slide, I'm going to shortly  introduce what social protection financing means   with regard to systems and programs resilience.  You can go one slide back, please. Yep. So here   systems and programs resilience. When we look  into social protection financing is more,   let's say the medium to long term question. When it comes to financing, the question is how  

can we ensure that social protection programs  financially withstand the shock to maintain   routine delivery? Now during this crisis, of  course, but also after the shock hit and after the   crisis also taking into account that our, let's  say, state budget is going to decrease and how can   we ensure that there's still sufficient financing  available for routine social protection programs.   Plus also taking into account that we have an  additional burden to programs and systems due to   the long-term effects of the crisis on people's  livelihoods. So this is actually translating into   the main questions that we have for this webinar.  So it could just show quickly the next slide.  

Our main core guiding questions for this webinars  were that which financing mechanisms can be   and are currently being used by countries  to create fiscal space to flexibly,   extend social protection, schemes, and  systems as a reaction to COVID-19 crisis.   This is actually a question that we cannot  answer fully during this webinar due to,   let's say our last-minute changes, and  due to that we don't have an expert on   fiscal space for social protection available  during this webinar, but happy also to   discuss this in the Q&A and also that  may be during one of our next webinars.   Then another question was the, do we have to  write instruments to address international   financing needs and how can the international  community mobilize funding in particular grants?   And also what are the lessons learned to  future crisis to ensure that financing   is available for rapid extension of  social protection schemes and systems,   and how can social protection field  financing be sustained beyond COVID-19   in low as well as in middle income countries? You can see in red here also one additional   question and which came up in with regard  to financing, which is: is there a role for   disaster risk financing for social protection  responses for similar crisis in future?   We see the potential to be discussed that this  could be discussed in a separate webinar.   After the webinar, you will also have the chance  to answer a short questionnaire. And if you are   interested in this particular topic, you can also  give us a sign and we can also plan a webinar   on this topic. And we also have expert already  identified who would be able to talk about that.  

So that's it from my side, I would now hand over  to Delphine and she would give a short input on.   From the perspective of the IMF on social  protection financing in the wake of COVID-19.   Thanks very much. Delphine, the floor is yours. Can you see my screen?   Yes, I can see your screen. So I think everyone  should be able to see your screen. You should have  

just to put it on presentation mode. I think. So good morning, afternoon, evening, everyone.   Thank you very much. For the opportunity  to speak and present during this webinar.   Maybe as a background the IMF has published last  year a strategy on social spending, which covers   education, health and social protection system. And this strategy recognizes the importance of   social protection system which play  in some contexts macro critical role.  

And so these strategies. It builds the  pillar of the way IMF is thinking right now.   And it also acknowledges the need for deeper  coordination among international organizations.   So it's just to give you a little bit of  background on the IMF thinking on this.   The talk will be organized in three topics.  The first topic I'll be brief, but sets the   scene before COVID-19 and illustrates, the  longstanding gaps in social protection systems   particularly in emerging  and low income countries.  

Then I will spend a little bit of time on the  emergency patches that have been put in place   to try and cover those gaps during the crisis.  And then in a third part, I try to sketch   on what could be sustainable fixes that could  emerge from these emergency patches down the road   to build resilient social protection systems. First the long standing gaps. Sorry. Martina   talked a little bit about the different dimension  with which we assess social protection systems.   Here, I'm focusing on the coverage  of current programs that are in place   in different, types of countries, splitting  into social insurance and social assistance.   What these graphs show and, that you're probably  familiar with is that coverage is not universal.  

Particularly not from social insurance  system, and particularly not in low income,   no middle-income countries. And it's especially  problematic when you think about social assistance   systems as well. Social safety net,   with a very low coverage at the  bottom of the income distribution.  

Sorry, can you see my screen still? In a   low-income country. These are the coverage  gap. I'm not going to enter other dimensions   such as generosity, which play a huge role,  but the gaps are there as well. And the gaps   are also, they're mostly low-income emerging  economies. So what these second slides shows  

so on the left hand side,  you have a table that shows   a functional classification of public spending. And what you can see is so that, first of all,   that fiscal policy matters for countries for  countries development. So that's kind a given.   What it also shows is that there are  large gaps across country income groups,   in terms of social protection outlays  with low-income countries spending   on average 1.6% of GDP on social protection  and advanced economies pending 13% social   protection. But what you can also see, which is  in the blue box is that these gaps in spending   also exists in other key development and  social sector areas such as education, health,   and other infrastructure that are crucial  for development. I'm thinking about water,   for instance or transportation. And  these other sectors are complimentary  

to social protection. So it's not just that  there are gaps in social protection systems.   There are gaps in other key social spending  sectors. And these gaps are actually quite   important. We have been estimating in the context  of your sustainable development goals, the SDGs   for selected sectors, health and  education and selected infrastructure.  

So the gaps are huge. And if you consider  low-income developing countries in these   sectors, these countries should be spending on  average about 16% percentage points more of GDP.   If they want to achieve the SDG goals in these  key sectors. And this is to be compared to some   other estimates that have been produced in terms  of financing gap of social protection system.   And thinking about the ILO estimates  of about five percentage points   needed in low-income countries for basic.   Okay. I'm just jumping in quickly.  It seems that we lost Delphin.  

We are waiting for her to come back   And to hope that she will have a  stable internet connection soon again.   So just one issue that I anyway forgot before  we started the presentation is also that   at the right side of your screen, you're  also seeing a chat box. And it would be   very good to, and I think some people already  started to send in your questions to send in your   comments. We are going then also to discuss  this afterwards in the Q and a session.   So we will have time then also to answer  your specific questions regarding the topic.  

So far, there is no sign that Delphin  is going to come back, I think.   I'm very sorry for this. We can't do  much about it. We also don't have anyone   available to step in for her  to give her presentation.   I would maybe wait not a minute  before then maybe turning to   our discussions if she's not showing up  and the let first present Mark and Lindi   and having their view from  South Africa on the topic.  

But I think it seems that she's not available  at the moment. I'm very sorry for this.   These are the technical issues that  we have to face nowadays. So I would,   I would invite now Mark and Lindi. If you  could also switch on your cameras, I'm seeing   Mark already. I don't see Lindi yet. Hello. So this was you would be good if you could   also switch on your mic so that we can hear  you. Thanks for your flexibility and thanks  

for joining these webinars. The original idea was  to have your view after Delphine s presentation on   a specific, let's say. Your specific, how you are  facing the problem of financing social protection   responses to COVID-19 now in South Africa and  what you are currently doing. Which financing   options you have, and also which challenges you  are facing now to finance the immediate responses   to this crisis, but also to finance, to sustain  social protection financing beyond this crisis.  

I would invite you now to talk first and  then we can see if Delphine hopefully   comes. Did   Delphin just not reappeared. Yes. I can see her now as well.   Delphine? Okay, sorry,   we lost you like five minutes ago. Maybe. I don't  know when you realized it. So I would, okay.  

Can you hear me now? Yes, we can hear you. I would then   change of plans again. Ask you the feed to  continue your presentation. We have seen your   fourth slide already. We lost you at the  slide of social protection systems compete   with other priorities spending. So we could  maybe continue with cost public resources,   if that would be fine. Oh, okay. Okay. Sorry. So yeah,   I had to reconnect. Can you see the slides  right now? I am at my own slide six.  

Yes, we can see your slides. We can  hear you clearly. Now I have no idea   what the problem was before. But I  would then ask you to continue with   your presentation and sorry for interruption. Okay. The idea of slide six is really competing   gaps and competing gaps over scarce resources. With these figures showing that low-income   countries and emerging markets are lagging  behind in terms of tax to GDP ratio,   with an average of 16 to 17% of GDP. And  the main point is it will take time to  

raise additional resources for taxes. We estimate  that 5% additional, of GDP can be raised over the   medium term, but this is it's a long process. Which means that Covering the gaps existing   in social protection and other key development  sectors will take time. We can think of a gradual   process of universal coverage as the ultimate  goal. And of course, to make, to beat consensus  

over. The fact that you raise additional revenue. This should be mirrored by, greater efficiency on   the spending side. So it's not just about  spending more raising more to spend more,   it's also to spend better. But the crisis puts,  it gives a new perspective on this story, I think.   Because given the large gaps in social protection  and the large needs, immediate needs, in social   protection coverage in all the countries in  the world, we can say, countries are now in   urgently covering the social protection gaps. This slide and this figure on shows the breakdown   of social protection measures that have been  implemented by 151 countries now and counting,   to provide income support to the many who lost  their jobs and lost their main source of income.   So social assistance programs are dominating the  response over social insurance and labor markets   programs and among social assistance programs. Cash is king with 54% of social assistance program  

being cashed transfers. And governments are  also moving along all the dimensions of social   assistance and social protect and social insurance  system. So it's not just the coverage that they   are expanding, but sometimes it's the benefits,  the generosity of the benefit themselves.  

And it's also the duration of the  benefits. They are really, the   governments are really acting across the board  here to cover the preexisting gaps that I   [inaudible]. And governments are also acting in  creative ways given those gaps and given most   of the time that they didn't know ex ante who need to be covered because they didn't bother to   or they didn't have the capacity,  or they didn't have the fiscal space   to just put together information of who is in  need and who would be needing in times of crisis.   Governments are really thinking out of the box.  And interactions and relationships are blurred,  

I would say, between social assistance and social  insurance, for instance, because what became   really important during this crisis is,  for instance, to cover informal workers.   Who by definition are not covered by social  insurance program? And there it's not so   much social insurance that steps in, but social  assistance programs. Relationships are blurred.   Relationships also between public and private  in terms of providing income support in a   timely manner is also changing with governments  relying on grassroots movement, organization to   just targets people in need, people that they  don't know about. They didn't know about before  

the crisis, because the social protection  systems in place didn't cover them.   And governments are relying on mobile  network operators for instance, to target   people that could be in need. So these are some  interesting things going on in terms of response.   In terms of additional fiscal outlays  of these responses, these are important.   And I think this is one of the main  messages of this slide. These are   important outlays between three and  four percentage points of GDP globally.   And these additional fiscal outlays on social  protection there reflect pre-existing weaknesses,   as we discussed, and also political choices. I can talk for instance about... so if you look  

at this little table that I put together, of  course these numbers are prone to change because   they just correspond to what was announced  as of April 23rd. But if you look at France,   for instance, on the social protection side,  it's doubled the additional outlay in health.   And it's mostly wages subsidies through the  subsidization of partial activity. Not so much on  

social assistance, but in the US, the additional  outlay for social protection. Also reflect   longstanding gaps in coverage.  And this is why they had to   beef up unemployment insurance, eca, etc.   To talk a little bit about the financing of  these additional outlays, I think that. The   priority number one that has been recognized  and talked over by my institution and many   institutions and also by the G20 creditors  group. The priority number one is really to   accommodate additional health spending to fight  the disease and to rely on global coordination,   to help the poorest country  with limited health capacity.  

And in this respect the fund has almost tripled  his catastrophic containment and release relief   trust, which is essentially grants to [inaudible]  country. Priority number two, I think is really   that the coverage of vulnerable household is a  priority, even at the risk of increased linkages.   So given that so many people were  not covered by pre-existing systems,   it's difficult for governments to make sure  that they are covering people who need the most.   But it shouldn't prevent governments to try and  reach those vulnerable households, even if it   means in the very short run, some additional  leakages that will be fixed down the road.   And of course, not all additional fiscal outlays  to provide social protection to more people are   born equal. They are not born equal. Because all  the countries have a different starting point,   yeah, in many ways, many emerging and developing  countries face multiple shocks at the same time,   the pandemic worsening, financing conditions. And a weakness of demands and for commodity  

exporters, lower commodity prices. So  these, I think specific country context   should be taken into account. And I think  Mark and Lindi will talk a bit about this,   but the priority when you start from the weak  fiscal position is to reprioritize expenditure.   Of course, safeguarding the priority expenditure  that are health and social protection.  

So in the two last slides I would like to open  a little bit the debate for what comes next?   Because in the first part I said that  they were longstanding guests and that   it would be a long journey to fill those gaps. The COVID-19 puts governments in a place where   the long journey should become a much shorter  journey because they have to cover those gaps.   But post crises, these patches need to be more  sustainable because what's done during crisis   is needed, but it's usually not  sustainable in the long run.  

So it doesn't mean that the things  that are put in place right now,   are not the foundation for a sustainable and  a more adequate social protection system down   the road. And I think what this crisis has put  has really stressed. It's the large premium for   governments that had the capacity to reach  people and to reach people adequately.   So it gave a huge premium to governments  with the capacity to deliver income support   relying on basic infrastructure, which is  reliable and universal ID, identification system,   some kind of financial inclusion, even if  it's not universal at the individual level.   But if it's who has a universal at the  household level, it's already something.   And integrated with socioeconomic data. And here  countries are also proving really creative in   finding ways to find people in need. I talked  before about using mobile network operator s data  

on at time consumption, which is what they do in  Nigeria, for instance, to target people who are   probably more vulnerable and who needs  income support in an emergency situation.   So countries are putting in place those quick  fixes to deliver. And I would say that in   a crisis, and this goes back to the  priority number two of the previous phase,   perfection is probably the enemy of good  enough. And governments know that then  

they are doing the good enough right now. So as the last slide, I would like to insist   on the fact that governments have shown real  creativity and real timeliness in the response   to provide income support. So they should  build on this and improve upon the new   capacity that they are building. It's not easy. There are mistakes and there are higher risks   in trying to fill up other the coverage gaps  right now. But they are they are doing it and   improving on those quick built delivery systems  should enable governments to better targets   and reduce leakages risks down the  road once the crisis has phased out.  

And of course, what's really important is  when fiscal constraints start kicking in,   claw back strategies should be progressive. And  I'm insisting on this because given the coverage,   the feeling of the coverage gaps right  now, and given preexisting coverage gaps,   it's going to require a strong strategy  and a strong commitment from governments   to claw back emergency response, but to also  maintain a decent coverage of social protection in   the future, built on sustainable fiscal strategy. And I will stop there. Thank you.   Thank you, Delphine. Thanks for  this insightful presentation.   I think there are a lot of key takeaways  that we can have from this presentation.  

I found it particularly interesting that you  showed that there is at the moment, some blurring   between non-contributory and contributory  financing due to this crisis and that   governments have become creative of how social  protection responses are actually financed.   Due to this pressure that governments  actually have to safeguard livelihoods of   their populations. Another interesting insight was  also that you already built a connection to one   topic that we are going to address, most probably in another webinar of the series,   which is identification and registration of  beneficiaries of social protection responses   in this crisis. And I think one of the main  messages that you, that we also can take as a   key takeaway here is it's not only about raising  more funding and spending more, but also to   spend better and to reprioritize budgeting. And that it's also about political choices.   And not only available funding. So thanks  a lot Delphin for this presentation.   I would now hand over to our two discussions from  South Africa. They are working at the National  

Treasury of South Africa. So they have a lot of  experience when it comes to social protection   financing in a specific country context. And I think I it was Lindi, you are going to start   with your input. And then we also have Mark adding  a little bit and giving some more input o, current   challenges and responses that you are implementing  at the moment in the South African context in   this crisis. So the floor is yours. Thank you.   Thank you.   So my focus will be on COVID-19 responses in  relation to social assistance in the form of   social grants, which are unconditional cash  transfers to those ending below predetermined   in country [inaudible]. So Mark will then expand  on the other social protection measures and the  

financing of social protection in general. In South Africa, soon after the start of the   nationwide lockdown on the 27th of March, there  was huge outcries from communities and households   for food and other support, as long as that  in most households that ordinarily survive   through [inaudible] jobs or what we call peace  jobs in South Africa in the informal sector.   So government had to respond swiftly and in  the social grant space, we decided on some   measures to cushion the poor households  against the hash impact of the lockdown,   and somewhat boost household consumption. I  mentioned that temporary the only five period   of six months, they build on existing programme  and infrastructure to enable timely support.   The aim is largely to replace the income  loss during lockdown. And mainly for informal   workers. The one measure we introduced is  a top up for all of the existing grants  

for the child support grant, which is  our biggest grant in terms of coverage.   This is almost double the top up amount. This increases in the first month [inaudible]   300 to all the children and then in the next  five months by a 500 to all the caregivers.   This measure is easy to do given that the  system already has the beneficiary details.   It was a matter of only adding to  the individual monthly amounts.   The challenge is that with the child support  grant and it is the largest in terms of coverage,   so it has over 12.8 million beneficiaries. So due  to the large volume and the limited resources we  

have, the top up could only be extended to the  household, which would be through the parents or   the primary caregiver who collect on behalf  of the child for five out of the six months   and to all the children in one month. In the first month, while we wait for the   State Social Security Agency to gear up its  system. We're going to provide the grant to while   we have that same yesterday actually to that,  to all the children, 300 and then in the next   five months, we then give it to the caregiver. So  once the system can attach the grant, the top half   to the caregiver, then that's what we'll do. This meant that in the first month it's the   lower amount [inaudible] to all the children.  And then in the remain months, we give a high   amount because it's only to the caregivers, which  are 7.2 million compared to the 12.8 million.  

So the other measure, we adopted is an adaptation  of our social relief of distress program,   which is usually a food [inaudible] for over  three months for households that are in distress.   The recipient is usually cue at South African  offices, which is a social security agency   we use in South Africa. You usually cue in  those offices for application for the program   and receive the food parcel. Recognizing  that this was that we couldn't continue   this practice in the midst of a pandemic where  social distancing is important, we then had to   shift to online and mobile applications. For similar reasons of social distancing   and managing the volumes, we had to shift to cash  rather than the food puzzles, to also provide the   household with a choice of using the money for  more than just food, but for other household.   So the cash is paid through banks and also through  what we call e-wallet, mobile money transplant   to those individuals who have lost their income. These should be individuals that are not receiving  

any other form of social grant. They should not  be receiving any unemployment insurance funding.   They should have household income of less  than the national minimum wage. So these   restrictions are meant to deal with the volume  of application, given the limited resources.   It was important for us to set out the qualifying  criteria upfront because the challenge has been   that we have not database of the targeted  individuals. And that have no mechanism of   tight mechanism of verifying them among the  many who are likely to apply. We might be seeing  

anything between three to 15 million people. If we don't tighten up the qualification   criteria and therefore making the benefits highly  unaffordable. We do have some mechanism to try and   limit the affordability issue, but that might have  issues in terms of social [unintelligible] to way   we want to then stop the benefits when  we've reached the maximum budget available.  

So those are the two measures. In terms of budget,  so there has been an increase on the social bank   budget by about 26% for the young. So we had  to be needing to source another 50 billion,   which is about $3 billion in addition to  the current budget we had allocated for   the financial year, which is 187 billion. The additional requirement is about almost  

1% of GDP that we now need. And for the relief,  a social relief of distress program specifically,   the budget will increase from the usual 500  million per annum, which usually covers about   500,000 applications. This will increase to about  4 billion to 13 billion, depending on whether we   receive 3 million or 8 million applications. So this is a massive increase in this program.   So those were the majors we've put  in place in terms of [inaudible].   Mark will now take over and speak to the  financing of these social grant measures   and other social protection measures  with that in place. Thank you.  

Greetings colleagues. Thank you very much for  inviting us to share our experience with you.   Both Lindi and myself are from the South  African Ministry of Finance National Treasury.   So just picking up from Lindy. So South  Africa has a strong social assistance system   but with a very limited contributory social  security system. So a strong pillar one and  

a strong product pillar three, but a weak  pillar two, mainly unemployment insurance.   We entered into this pandemic with a weak  fiscal position. Our deficit was 6.8% of GDP.   Our interests as a share of the total  budget was rising from about 12%   to 13% and by the [unintelligible]. You have  the MTF to 15% of government expenditure,  

which is quite a big share of government  expenditure. Actually, interest expenditure   will exceed both health and social expenditure. Big reliance on debt, which is becoming a problem,   a decade of low growth from following the  global recession and our ratings on debt   having recently fallen below investment grade,  but the COVID pandemic was seen as a black swan,   a once in a lifetime event, something that was an  extremely serious threat to health and to income.  

And it's actually merged that the, the threats  to, to income are greater than those to health.   And the need to protect the  population through the lockdown is   been extremely pressing. Now what the  pandemic, not only does economic growth   slow greatly, in our case, probably,  declining by up to 10% or more,   but the text stance has shifted very substantially  to protect businesses from going under.   And I'll go into that in a little bit of detail.  There's really unprecedented revenue shortfalls,   something like between an 11% and a 27% decline  in tax driven revenue this year at a time of   higher expenditure needs. So all of this leading  to large fiscal episodes, so posting 10% of GDP,   and this response can be managed if the lockdown  is a relatively short duration, but if it extends   for [inaudible] periods, we risk major a worsening of unemployment poverty,   economic growth revenue, and it's going to become  more difficult to sustain. So Lindi talked about  

the 50 billion social assistance intervention,  both increasing existing grants and repurposing   some of the grants like the caregiver grant she  was describing, which is a 26% increase overall.   But for these six months, the intervention is  actually a 50% increase for this limited period,   and just talks about this new intervention  of the new cash socially of distress,   but we've also put in interventions in  other sectors. For the employed in our   bullet to unemployment insurance fund 40 billion  grand what's called the [inaudible] benefits,   which has a a floor at the level of the  minimum wage has been put into place.  

We've also through our tax policy put in place in  employment tax incentive for low-income workers.   And put in place a range of  interventions to support small business.   Some of those I'll talk to, and  also credit guarantee scheme of   up to 200 billion Rand via the banks to  protect firms from going under and in that way,   worsening unemployment. Also through our  competition authorities interventions to   avert price gouging, because a lot of  basic commodities rapidly rising in price.   So our financing response overall was around  10% of GDP, that's across all sectors and   substantially based on deficit financing,  mentioned the deficit reaching 10% of GDP,   around 130 billion through reprioritization  between government departments. And for the   first time South Africa, which has very  little experience in borrowing from   international financing organizations like the  new development bank, the world bank, the IMF,   the African Development Bank for the first time  South Africa is looking to borrow 95 billion ran   to support some of these responses. Fortunately,  throughout our pilot to your unemployment  

insurance fund, we have very large surfaces, then we were able to draw down around 40 billion   surpluses in unemployment insurance fund. There  were some issues in the timing of our social grant   payments, which allowed us [inaudible]15 billion  cash flow issue availability this year. Our weekly   bond auctions have been affected and our reserve  bank has taken on an accommodative monetary   stance, including lowering interest rates. So the response that our Ministry of Finance   announced about a week ago now is around a  500 billion Rand response. That includes the   50 billion support to vulnerable households for  six months, 20 billion for the health sector,   20 billion to local governments, there is  credit guarantee scheme and arrange of other   interventions. And the sources of financing  for this 500 billion, which is around 10%   of GDP intervention, include reprioritization 130  billion borrowing from these multilateral finance   institutions that I mentioned around 95 billion. Drawing on surfaces from our social security  

funds, like the URF would put 40 billion  there, but about 60 billion in total.   And a number of other sources of shovel  cover right now. On the tech side we've...   although the previous speaker talked about  the need to increase text to GDP ratio,   the response from our tax authority very  much has been actually to during this period,   make it easier for businesses to try and survive  this period of tremendous economic slowdown.   So this is putting in place of  a tax subsidy to employees of   up to 500 grand a month for the next four  months for people earning under a certain   income threshold, which will help about 4  million workers costing what 15 billion rand   and quite a lot of provisions aligned  businesses to delay texts through   this period where there's a shutdown. For time reasons, I won't go into more   detail on the tax responses, but there's a fairly  large set of text responses. Our tax authorities   actually were very responsive including this 15  billion employment tax incentive, which started   off actually as a youth employment tax incentive.  So that's been increased, but also widened.  

And fiscal policy, I mentioned that we going  to see a substantial widening of the deficit   substantially reduced, driven new collections.  Our president talking about a wartime budget,   so this is a war which we have to fight  against the pandemic. And I guess against   widespread poverty into the lockdown, we've had  to use a wide range of [inaudible] instruments.   We first thought we'd have to use unforeseen  and unavoidable expenditure and adjustment,   budget and it turned out that would be far too  slow. We had to mobilize environments disaster   funds using our disaster funding system. Send  a letter from the Minister of Finance to the  

Minister of Social Development Outlining  what additional funding could be spent.   Section 16 of PFMA emergency funds. We are recrafting the budget and we'll   table an early adjustment budgets, substantial  reprioritization, all of this happening at various   levels of government. I'm not going to  talk through the details of some of our SME   small and medium enterprise support, that  cross many different sectors, including   small shops in townships called spaza shops. That I mentioned the large 40 billion [inaudible]   intervention, tourism relief funds, agriculture,  small farmer support, quite a range of different   interventions across different sectors.  Towards the end, now some of the longer term  

[inaudible] I think learning out of. Firstly  is the value of having accumulated savings.   We had a several hundred billion surplus in our  unemployment insurance fund, and we now are able   to relatively easily drawdown 40 billion of  that surplus. We've had to, for the first time,   start trying to focus on ways to target informal  sector workers who were extremely vulnerable.  

And from the very first week of  the lockdown started losing wages.   We were actually too slow in getting to this  group. Only after the first three weeks,   we realized we had to put in place an intervention  for this, which is partly why there's 50 billion   intervention has now been put in place. This  part of the attempt to focus on caregivers  

of children was trying to get indirectly  to these informal sector workers.   We've learned lessons around new  payment mechanisms for the unbanked,   including around cash send and e-wallets,  various electronic alternatives to food parcels,   what Lindy talked about. In terms of the level  of our child support granted previously was   below the food poverty line in South Africa. Currently, we've now moved above that and there's   lessons in that. This is the first time in our  country we've given grants to unemployed adults.   This is a special six-month cash grant. So it's a  new intervention for our middle income country and  

something which we'll have to think about going  forward is to pass prolonged benefits through   the [inaudible] and or other mechanisms. And also it's challenged us to deepen our   electronic linkages between systems of our  social security agency, our tax authority,   our unemployment insurance fund, and our  student funding organization. So just,   I think this is the last comment in conclusion,  our income protection emerged as a major   challenge from the lockdown. Lindi and I, our section in the Ministry of Finance Deals   with health as well, the pressures of the lockdown  has massively effected income. So that actually   the cost of the social protection response ended  up being larger than the health response about   double to date we've needed, required multiple  financial instruments to redirect funds   rapidly. All of this has created serious  challenges to growth in the fiscal position,   but we've seen this as a black swan, a once in a  lifetime event. And we've used the whole range of  

financing instruments, including environments,  reprioritization, deficit financing, loans from   international organizations, taxes deferments,  and subsidies, all of the system markets stable.   We still seeing large queues for  food parcels, even food rise. So   very difficult situation on the ground. Quite  difficult to respond. Thank you very much.   Thanks a lot for sharing the experience from  South Africa. I think this was very insightful   again and very practical. So we've seen, or  we've heard from you the innovative measures   that the South African government is currently  taking to respond to this crisis, but we've also   heard from you the challenges that you are now  facing in terms of financing these options.  

But we've also seen some very practical insights,  how you are currently identifying additional   sources for social protection funding. And  also creatively identifying what can be done   in this, as you call, wartime budget that  you have to set up. So thanks a lot. I think   there can be also some lessons learned for other  countries and some very interesting insights for   other countries, how to deal with this crisis. And we have now roughly 30 minutes for questions  

and answers in that I have already seen that there  were some questions coming in. So I would start to   pick out like two or three questions that I'm  going to give back to you, as panelists. And   I would give you then some time to  answer them and then we can see if   we have time for another round of Q&A. So let me start with one first question.   One question that came in is the role of let's  say, yup. It was from Mary [unintelligible].   She said that in her opinion, the  big challenge to finance such kind   of emergency is the absence in many low and  middle-income countries of emergency funds.  

And how can low- and middle-income  countries immediately finance   these responses. As I said, there is a webinar  in the pipeline on emergency, on disaster risk   financing. So maybe there might be some questions  that can be answered there as well. And I think   what's some experience from South Africa that has  been shared already regarding emergency funds.   But maybe the colleagues from South Africa  can elaborate a little bit more on that,   but also Delphin, you're very welcome to share  your insights on that. And the second question  

that I want to take back to the panelists  is yeah, I think we also already pointed a   little bit on that, but maybe you can elaborate a  little bit more about the question if it is always   about fiscal space or if it is also a political  question about political will that is informed by   solidarity and rights-based approaches. So maybe we can also see   some different approaches from country to country  regarding that question. Anything else? I think   that's it for the moment. So let's start with  these two questions and feel free to give   your insights also, if you don't have an answer  that was to put additional questions to that.   We also will have time to elaborate these  questions and then afterwards in the written   Q&A session. So it should be a lively discussion.  And yeah, I would invite you Delphin first to   to reply and then also Lindi and Mark  from the South African perspective.  

So first on the social emergency front maybe  let Lindi and Mark talk a little bit about   this I think this is from a country perspective.  If I understand the question, not so much from   a international perspective, right? So maybe Lindi  and Mark can talk a little bit more about, about   this. Then on the political side of financing  and putting in place social protection systems.   As anything else that is a fiscal policy,  this is also a political choice. And the   fiscal policies reflect social preferences  in countries. So I think what we can do as   international organizations, for instance on top  of better coordinating among ourselves to provide   the best quality support to countries is maybe to  help champion countries that have made the choice   of building a strong social protection system that  work. I think that that is a way to make the case   that social protection systems are worth investing  in. Within a broad certain spending strategy  

that includes education and health, which  reinforce social protection system as well.   Because when you have healthy, well-educated  people it's easier to have social protection   systems. So I think what we can do as  international organization is champion   countries on top of helping them implement their  social protection strategy in a broad sense.   Okay, thank you, Delphin. So I would tend  over to Lindi and Mark also to answer to   the two questions, especially maybe you  can also elaborate a little bit more on   how South Africa used the emergency fund, but I  think you already gave some insights on that.   Okay. let me start on that. So firstly, it's really important for all countries to have  

some disaster and emergency funds, because I think  all countries get disasters and emergencies. These   are things that are very unpredictable events  like floods. All kinds of natural disasters. So   it's really almost like a rule of  public finance that a country should   make PFM provisions for these things. So in our country, we do have a disaster   management system. I think it's [inaudible]  provincial and local government department.  

And we used it very early on in the response.  The first thing we did actually was to allocate   using the disaster funds, around 166 million  for personal protective equipment for health   workers, because it was really important  to protect health workers very early on.   So we use the disaster funds for this and  we might continue to use the disaster funds   in this year further. Now, the problem about the  adjustment budget, which will be the main way we   completely retable the budget it takes quite  long to go through the parliamentary process.  

Again, it needs to have in one's PFM legislation  in a country, and I think really most countries   need to have this, is provisions to be able to  make a[inaudible]t, for example, in our case,   the Minister of Finance to make emergency  allocations prior to the adjustment budget.   So we have it in our public finance management act  to the section 16, and we have it in our, we have   a kind of federal laws, semi federalized system, so at the provincial level, section 25   emergency provisions. You know,  we have a fairly well structured   ability to intervene very rapidly for disasters  and emergencies. [unintelligible] but this there's   a clear legal structure for this, which is useful.  Just on the second question. I must say that   our president has absolutely led the response  to COVID from the front. And he, you know,   he basically shut the national borders very early  on in the epidemic, as the cases were starting to   spike in Europe, for example. And within a week  of that, he declared a full national locked down.  

And he's been very strong on the health  response and on the income protection response,   to the extent that he personally announced  this 50 billion income protection response.   So the president has lived a very strong on this  issue. I think the only thing that we are really   struggling with on, I think several,  many countries are starting with this now   is that, it seemed the obvious thing  early on to shut down and to lock down.   And so the entire country  virtually went into lockdown.  

Now we found the effects on unemployment and  the economy even within three weeks. And when   we extended two weeks to five, by the end of the  fifth week, the effects are enormous. You know,   over a million jobs lost and is growing  all the time, huge hunger on the streets.   Small businesses collapsing rapidly. You know,  trying to balance the economic effects and the  

health response has been really tricky  to get that balance, and he's still such   very uncertain how to get that balance right.  Because the epidemic, despite a five week full   lockdown would be an [inaudible] stage, five lockdown is still growing actually,   our curve is still rising. You know, the problem  is that people are progressively you know, needing   income protection and all extremely vulnerable. So  that has been difficult to achieve. Thank you.   Thanks for your detailed responses. I think  we have time for another round of questions.  

So there were some additional questions coming  in. One for Delphine was handed in by Flora   [inaudible]. And she asked if you could please  share what strategies are currently taken by   low income countries to finance their  health sector, and also maybe the social   protection aspects of it. And do they  rely on international loans or grants?   So maybe you can share some of country  experiences and responses from IMF, but also   other international organizations. Then  we have one question from Fabio Veras.  

He's interested to the challenge is how new  quasi universal schemes and or innovative   and subsidized social insurance for informal  workers can be set up during the recovery phase,   using the new debates quickly, put together to  target the missing middle informal workers.   The technology seems to be available, but how  will these new programs be funded? What are   the options that we have? And maybe relate to  this. We also have the question from [name]   He or she asks such as by the  field universalization is the   ultimate goal. Are you in favor of universal  basic income scheme as a part of progressive   universal strategy? This would be, let's  see a question also, in general, but also   maybe from a South African perspective. So I would  tend back these questions to all of you. Again,  

would ask first if a, going to give a reply to the  questions that she did, directly address to her.   But also to the other ones, and then would  hand over to the colleagues from South   Africa. And then we can see if there's  still room for additional questions.   Thank you, Martina. On the first question on this  financing strategy. So I'm not familiar with all  

the financing strategy by low income countries and as I said in the presentation and I think as   Lindi and Mark shared it really much depends on  the country context and the constraints that are   in the country. Again the CCRT what we call the  CCRT, which is the Catastrophe Relief Trust Fund   has been tripled to go to 1.4 billion dollars. And this is used to provide liquidity and spending   capacity on health, mostly on health response.  Two countries, Haiti, for instance which is a low  

income country has recently received some money  and many countries are tapping this facility.   But I think as Lindi and Mark said, it's going to  be the financing mix and they were really clear   about this. It's going to require a financing  mix. And I think countries are putting this   together. On five years question on, I think  he touches upon the point of formalization and   in a sense, can we use fixes and programmes  that are put in place or strengthened right   now during the crisis to formalize the  informal economy in a sense. How do we build   on the databases that are currently put together  that are probably flawed and have weaknesses,   but that are sort of knowing exactly the people  that could be need when there are income shocks.  

I'm not sure the crisis is the time to try  and kill... and achieve many goals with one   instrument, there are ways to build on the current  programs down the road, nudge people and inside   them, encourage them to give information so that  you have information on a greater coverage of   information of your population. I think what is really important   for governments it's to maintain and strengthen  the computing capacity and the data capacity that   they are currently putting in place. Probably  also partnering with private companies.   I always think of the mobile operators but also  with business organizations, informal business   organization in different sectors that are heavily hits like the transportation sector etc.   This something that can be built upon a computing  capacity, data gathering capacity, and then   help broad under coverage of social protection.  But then maybe there is a greater conversation   to have. And this pertains, I think to  another question that was on the chat,  

which is the picture between social  assistance and social insurance.   The picture I showed, I was a  bit misleading because it was   showing that the response was mostly social  assistance. It's based on the World Bank live   paper that Ugo Gentilini is doing. And  I think I have to commend their work.   It's a really good piece of work. What shows is  that countries may have social insurance programs  

in place. Those social insurance program disappear  as you go down the income ladder across countries,   this was [inaudible] I showed and  what these graph was showing is that,   in new responses or in additional strengthening  of programs, countries currently are doing more   on the social assistance side, because  it's easier for them. And because in   many countries, this is what exists. I think  Lindi, this is what you insist is also that  

it's social assistance that are, that is  strengthened right now with different transfers.   And I forgot. Universal basic income,  universal transfers. I think this is a long,   I mean, this is almost a history  debate. Universal transfer or what we,  

what I prefer to call them quasi universal  transfer, near universal transfers.   Maybe a useful tool during this crisis. I don't think that governments should shy away   on principle grounds from quasi universal  transfers in terms of crisis, because as I said,   the priority is to cover vulnerable households.  What governments are trying to do when social  

insurance are in place or social assistance  programs are in place to give is to bridge.   The actual delivery of income support with some  quick responses. We've seen that in us. It's not   a low-income country, but they have put in place  what they have called a universal transplant,   which is not a universal transfer. They  targeted as much as they can on income ground.  

But it's quasi universal. They are delivering a  check and as they do that, they also buy time for   social insurance programs to kick in. They  have had massive demand on unemployment   of an unemployment benefits. It takes a toll  on social administration, which is not always  

staffed adequately to [inaudible] huge demand. It has been the case in the UK and the US. So I   think quasi a universal rapid income support, when  they can be done, are useful. And what we see in   many going come in emerging countries  is new social assistance programs that   are being developed precisely to cover the many  informal workers that were not covered before.   And it's not universal. It's nearly universal  because of the large share of informality in  

these many countries. What matters is then how do  you make this sustainable down the road? I think   it's, again, Fabios question is how do you make  that sustainable from a fiscal point of view   and how do you make that sustainable  from an upright rational point of view?   Because the data that you are collecting  right now in an emergency case, and that   you are building your new programs on, maybe you  can dwell and build the foundation of a stronger   social system down the road, but you need to have  in mind that this needs to be sustainable down the   road and maybe quasi universality, or categorical targeting through   child benefits as it's done, for instance, in  South Africa is the way to go. But I think we   shouldn't be shy of having this conversation.  That's for true. Over to you Lindi and Mark.   I can speak to the issue on  universalization and a basic income grant.  

So in our context in South Africa,  given the limits at resources   and they huge inequality for us, it's not  a priority at this point to universalize,   because we've got high levels of poverty and  inequality. So that's what we'll focus with   targeting at the moment. And I think  Mark can add on the other questions.   Thank you. Just I just wanted to talk a  little bit in linking to, what's a question   I'm asked by our colleague, Jeremy Seekings  on why it's taking so long to introduce thenew   350 rant grants in South Africa. And Jeremy I've  also read a really wonderful paper, which was  

shared informally with me that you wrote on this. So you'd actually be the right person to   answer this question. Just not on  resilience, and adaption. We have   not a very strong social security agency,  although it has about 9,000 staff. It's not   a very strong institution and it went through  a period of about two or three years where it   was using an organization called CPS to pay  a recipient. And when that contract ended a   crisis emerged in the system and which eventually  the constitutional court had to rule on extending   the contracts that the whole social grant payment  system would not collapse. So it's not a very big,   it's not a very strong, it's  not a very resilient system.  

Now this became worse in the pandemic  because with COVID, the personnel   in the agency would be too afraid effectively  to come to work. Most of the personnel of the   agency have been at home for several weeks.  So the capacity of the agency is weakened.   And on top of that, there was a concern. But what happens in South Africa is social   grants are paid on a particular day of the  month, historically at the first of the month   or something like that. And so one would get huge  queues of recipients. Coming on that day. And what   we found is that was exposing a lot of elderly  people to actually to took the COVID virus by   standing in long queues for long periods and even  getting electronic payments in retail stores.   And [inaudible] so what they did is, in the  context of this COVID epidemic, they split   the payments to two or more times in the month.  And the first time they did that was yesterday.  

But again, it [inaudible] a resilience  problem and they made quite a lot of   mistakes in the way the payment worked yesterday. There's been a lot of complaints in our national   media yesterday about [inaudible] disasters around  social grant payments yesterday. Which is related   to your question a

2021-01-11 16:38

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