Elderly beneficiaries of social security allowance rose by 300,000 last fiscalMounting cost raises concern about scheme’s sustainability.
Elderly beneficiaries of social security schemes increased by nearly 300,000 in the last fiscal year 2022-23, putting more pressure on the national treasury after the government lowered the eligibility age to receive allowance by two years.
The previous Sher Bahadur Deuba-led government had lowered the eligibility age for elderly from 70 to 68.
As a result, the number of beneficiaries in this category increased by 295,281 in the last fiscal year 2022-23, according to the Department of National ID and Civil Registration.
The department said that the number of beneficiaries in the category increased to 1,607,296 by the end of last fiscal 2022-23, up from 1,312,015 in the previous fiscal 2021-22. The number of overall beneficiaries increased to 3.8 million in the last fiscal year from 3.57 million in the previous fiscal.
As a result, the budget allocated for social security allowance in the last fiscal year proved inadequate. The department said the finance ministry injected extra Rs4.68 billion on top of the initially allocated Rs105.70 billion, the department said.
“The main reason behind the rise in beneficiaries in the last fiscal year is the lowering of eligibility age to receive elderly allowance,” said Nawaraj Jaishi, information officer at the department. “Along with the rise in beneficiaries, the government’s spending on social security also grew.”
In recent years, the government’s spending on social security allowance has been rising rapidly, raising concerns about the sustainability of the scheme.
“There is a race to increase the allowance and lower eligibility criteria,” said Jaishi. “This has contributed to a rise in the number of beneficiaries, leading to increased public spending in the sector.”
The then KP Sharma Oli government increased all social security allowances by 33 percent, including the elderly allowance to Rs4,000 per month from Rs3,000 per month in fiscal year 2021-22.
The Sher Bahadur Deuba-led coalition government, which came to power in July, 2021, decided to lower the eligibility age to get elderly allowance, despite concerns raised by experts.
As a result, the government’s expenses on social security, based on cash transfers, have been rising. In the fiscal year 2020-21, the government spent Rs68.61 billion on social security allowances, according to the Department of National ID and Civil Registration.
The government’s spending increased to Rs95.97 billion in fiscal 2021-22. For the current fiscal year 2023-24, the government has allocated Rs109.71 billion to distribute social security allowance, according to the Finance Ministry.
Besides direct cash transfers, the government spends heavily on various other social security schemes, including medical insurances and subsidies, which also burden the state coffers.
According to a World Bank report, the overall public spending on social protection rose rapidly in Nepal for a decade—from fiscal year 2010-11 to fiscal 2019-20. According to the report, the government’s spending on overall social protection was Rs26 billion in fiscal year 2010-11, which surged to Rs189 billion in fiscal 2019-20.
Despite the rising cost of social security, the government is not in a position to reduce it. “We have to increase spending in the sector to implement the rights provisioned in the constitution,” said Nara Bahadur Thapa, former executive director of Nepal Rastra Bank. “Even to meet the Sustainable Development Goals by 2030, we have to invest in social security.”
The social security scheme was launched in 1994-95 by the government led by Manmohan Adhikari, a UML leader. The scope of the scheme, which started by providing Rs100 a month to the elderly, was gradually expanded to include single women and people with disabilities in 1996-97.
Members of communities on the verge of extinction and disabled persons were also added to the list in 2008-09. Dalit children made it to the list in 2010-11, while widows were included in 2011-12.
Dalits from the Karnali region were added in 2016-17 and children from 15 districts with low human development index values were made beneficiaries of cash transfers in 2018-19. The number of such districts has gone up to 26 till fiscal 2021-22.
The government still needs to put a number of groups on the list of beneficiaries as per the Social Security Act—2018.
For instance, indigent people (those who earn less than what is specified by the government in the Nepal Gazette) and helpless women legally separated from their husbands are yet to be enlisted as beneficiaries despite legal provisions. Currently, only divorced women aged 60 years and above are getting social security allowance.
Thapa said growing recurrent expenses including in social security has forced the government to compromise on capital spending as it cannot reduce recurrent budget. “As the government’s revenue collection has been disappointing amid sluggish economic activities, all tiers of the governments–central, provincial and local–will be forced to cut capital spending,” said Thapa.