Welfare chequeSocial security schemes should be equitable and sustainable.
The number of beneficiaries receiving cash transfers under the country’s social security schemes has nearly doubled in the last decade, which has increased the burden on the state coffers and cast doubt on the sustainability of social protection. Officials at the Department of National ID and Civil Registration say the number of beneficiaries reached 3.06 million during the last fiscal year compared to 1.56 million in 2010-11.
Along with the massive growth in the number of beneficiaries, government expenditure on social security has also increased. According to the department, cash transfers to beneficiaries alone amounted to Rs66.16 billion in the last fiscal year. Besides, the spending on health insurance for citizens, retirement benefits, financial assistance for natural disaster victims, and scholarships also incur additional social security expenditure amid faltering economic growth.
According to the department’s recent report, annual government expenditure on social security has been increasing by Rs3 to 4 billion, which will be a massive challenge for its economy. While the current number of beneficiaries account for around 10 percent of the country’s total population, the government, over the years, has expanded the scope of beneficiaries and is yet to include several groups on the list of beneficiaries as per the Social Security Act 2018.
Given the rate at which the numbers of beneficiaries are doubling every decade, beneficiaries could soon account for almost 30 percent of the population. This trend is unsustainable and needs effective policy interventions to fix an already broken economy and safeguard individuals and communities from rising uncertainties.
According to the Ministry of Finance, Nepal’s average economic growth has stood at just 4.6 percent in the last decade. Caught off-guard by the pandemic, the economy is projected to have grown by only 2.7 percent against the overly ambitious and unrealistic target of 8.5 percent in the last fiscal year, according to the Central Bureau of Statistics. Last week, the World Bank projected that Nepal’s economy would grow by just 0.6 percent in the current fiscal year, followed by 2.5 percent in the next fiscal year 2021-22.
The country’s revenue streams are sagging and shrinking while funding for the ever-expanding social security schemes has been a perennial liability for the state. To the extent that last year, to reduce social security costs, the government even attempted to discontinue social security provisions by issuing a social security regulation. But following protests from the beneficiaries and political camps, the government backtracked from the decision and even introduced an ordinance to ensure beneficiaries’ rights.
Announcing social security schemes or increasing the allowances may help achieve political math; but without economic growth and improved revenue sources, it will only increase our liabilities and make social security unsustainable and unimplementable, defeating the purpose of the welfare plan which is a fundamental right of Nepalis.
Social security expenditure will undoubtedly increase with pension payments and other social assistance programmes to the most vulnerable individuals and communities. The government must strategise financing mechanisms to fund social security schemes and negotiate social security agreements for migrant workers in major destination countries. The political leadership needs to work with the private sector and the informal economy to introduce sweeping reforms in the labour market, and formulate a systematic policy framework to fill this enormous gap and ensure that social security schemes are equitable and sustainable.