By Hyun H. Son
In principle, social protection programs should target the poor and vulnerable. In practice, however, this is not always the case, particularly in transitioning countries that are facing fiscal constraints and weak institutions. Tajikistan offers a case in point.
Following its independence in 1991, Tajikistan inherited a comprehensive social protection system consisting of various cash and in-kind transfers. Tajikistan’s social assistance and social insurance are non-contributory, so no contributions are collected from employees. Social pensions comprise the bulk of the government’s social protection payments.
About 87.7% of the 685.5 million somoni (TJS) (or about US$142.2 million) social protection fund in 2009 was spent on three public transfer programs: old-age pension, disabled pension, and survivor’s pension, which are all provided under Tajikistan’s Act 796 of 1993. Between 2009 and 2013, 73% of the social protection sector budget was allocated for social pensions and 12% for social assistance.
This includes social pensions to disabled or those of retirement age that did not contribute to the pension fund, coverage of electricity and gas bills for the poor, a school subsidy, and various subsidies for world war veterans, Chernobyl victims, and ecological/voluntary migrants.
However, the country’s pension system is financially constrained and inefficiently managed.
Only 43% of poor households in Tajikistan receive cash from the government, yet 33% of non-poor households do, based on data from the Living Standards Measurement Survey conducted in 2007. On their own, Tajikistan’s pension schemes don’t provide enough for even minimum subsistence since the benefits are low, tedious to collect, and often delayed.
More strikingly, 57% of the poor are excluded from or are not beneficiaries of old-age pension, disabled pension, or survivor’s pension. For all three pension programs, 47% of the total beneficiaries belong to non-poor households. This shows just how inefficiently targeted Tajikistan’s social pension programs are.
We can also see inequity in Tajikistan’s social pension system. Poor households receive TJS 11.23 (about US$2.3) per equivalent adult in average monthly pension, while their non-poor counterparts receive an average monthly pension of TJS 14.78 (about US$3.1) per equivalent adult. (Note, currency conversions are based on an exchange rate of $1 = 4.82019 TJS on 18 April 2014).
The need for a well-targeted social protection system cannot be understated in economies transitioning from a centrally-planned to a market economy. Tajikistan’s social pension system still adheres to the Soviet era’s system of universality, under which all citizens are entitled to receive subsidies and social pension programs are non-contributory.
There are several problems with this approach. First, there is not enough money to go around for the government to adequately support social protection. In Tajikistan, where social unrest has adversely affected economic growth, total expenditure on health, education, and social protection significantly dropped from 19.9% of gross domestic product (GDP) in 1992 to just 7.2% in 1998. More recent estimates show that Tajikistan’s social protection sector budget was projected to slightly decrease from 4.5% of GDP in 2009 to 4.2% in 2013.
Second, transitioning countries often are unable to implement targeted programs. Legal and regulatory frameworks, poverty mapping and institutional capacity have not been developed in Tajikistan since technically there were no rich or poor households.
Without sufficient targeting, social protection programs have limited scope to improve poor households. Tajikistan’s three social pension programs have reduced the proportion of people living below the poverty line, or poverty head-count ratio, by just 3.5%. Old-age pension has the largest impact on reducing poverty head-count ratio at 3.12%, while survivor’s pension has had a negligible impact.
However, if you measure efficiency by comparing the impact relative to the costs of each program, a different conclusion emerges. The disability pension program is the most efficient in terms of poverty reduction, reducing the poverty head-count ratio by 0.40% for every million somoni spent compared to the old-age pension, which reduces poverty head-count ratio by 0.31%.
If Tajikistan’s social protection programs are to effectively make a dent on poverty, appropriate targeting mechanisms are needed. For instance, they could use an approach tied to the national poverty threshold to identify recipients. By properly targeting the poor and vulnerable, much-needed public resources can be directed to those who need social protection the most.