The System of Cash Transfers in Bosnia and Herzegovina Issues in the design of an effective and...
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Transcript of The System of Cash Transfers in Bosnia and Herzegovina Issues in the design of an effective and...
The System of Cash Transfers in Bosnia and Herzegovina
Issues in the design of an effective and affordable system
Christian BodewigThe World Bank
The challenge of improving efficiency and equity of cash transfer system in BiH given limited resources
Need for reform of cash transfer system in BiH for reasons of
Fiscal affordability Effective and equitable social protection and poverty
alleviation
Implications for Reforming… …Veterans’ Benefits …Social and Child Assistance …Employment Services …Pensions
The challenge of improving efficiency and equity of cash transfer system in BiH given limited resources
Key observation:
Overall spending on cash transfers in BiH is substantial, but the structure of spending across different programs has failed to evolve to meet the needs of a society and economy moving from post-conflict reconstruction to longer-run development.
Veterans’ Benefits I: BiH has one of the most extensive and generous veterans’ entitlements in the world…
Veterans’ benefits single major cash transfer in both Entities – around 4 % of GDP, with additional spending at sub-Entity level, estimated at around 1.3 % of GDP in FBiH and 0.4 % in the RSAdditional significant indirect transfers, resulting in substantial forgone revenues from health contributions and co-payments, and tax and customs revenues, adding up to around 1% of GDPAdded up this is roughly equivalent to spending on the entire education system at all levels in both Entities and three quarters of health expenditures
Veterans’ Benefits II: …but benefits are poorly targeted and fail to effectively protect those most in need
Poor targeting: Despite large amount of resources, system fails to protect most vulnerable beneficiaries. Beneficiaries mainly family beneficiaries (around 60% of total) and veterans with lower categories of disability (60-65% of disabled veterans) Entitlements not related to ability to work, actually having work or receipts of benefits from other parts of cash transfer systemLegislated entitlements remain far above available resources and are unsustainable – systems are already accumulating increasing arrears
Veterans’ Benefits: Reform suggestions
Harmonize legal frameworks FBiH single Entity law
Simplify/rationalize entitlements: Consider removing those with disabilities below 50-60%
from benefit entitlement, though not from system altogether Eliminate benefits for grandparents and siblings For parents: target benefits to those most in need, in
particular where working or receiving other cash transfers For spouses, impose restrictions related to re-marriage For children: reduce maximum age for benefits to end of
school
Initiate re-certification and improve reliability, timeliness and transparency of data
Social Welfare and Child Protection: Both Entities, particularly the Federation, spend least in regional comparison
0.00.51.01.52.02.53.0
Perc
ent o
f G
DP
Comparative Social Welfare and Child Protection Spending (in % of GDP)
Social Welfare and Child Protection: Financial crisis and lack of coherent and sustainable structure
Even where there are legislated entitlements, they are often irrelevant due to resource constraintsSmall proportion of registered beneficiaries actually receive benefitsWide variation of benefits paid across Cantons in the Federation, especially in child protectionDecentralized financing at municipal level: vicious circle of poorest areas least able to pay benefitsUnclear division of responsibilities across governmentsPoor coordination between different benefit programs and delivery mechanisms
Social Welfare and Child Protection: Reform suggestions I
Policy Framework: Legislate new Social Protection Strategies in both Entities emphasizing:
Realistic core set of entitlements, with clearly defined financing source incl. transfers from Entity budgets to finance one or more core benefit equitably
Create incentives for adequate local government spending on social protection through matching grants
Review existing targeting criteria in light of newly available data from LSMS, and evaluation of CSW ability to means-test effectively in highly informalized economy
Provide equal incentives for community-based and institutional care
Social Welfare and Child Protection: Reform suggestions II
Institutional Framework: Redefine institutional responsibilities for social
protection Establish sound regulatory framework for CSWs
Role of NGOs in Welfare Provision Establish legislative and regulatory framework
Data Reporting System
Employment Services: Lacking in focus, clear institutional structure, accountability and transparency
Challenges for Employment Services: Demand for effective programs likely to rise with
further privatization and enterprise restructuring Need for effective intervention through unemployment
benefits and effective job search services
Institutional issues: Incomplete implementation of Federation EI
institutional arrangements, with Hercegovacki-Neretvanski Canton EI still to be established
Parallel existence of former "State" EI without clear legal basis
Employment Services: Lacking in focus, clear institutional structure, accountability and transparency
Programmatic and operational issues
Unemployment benefits: Despite large number of registered unemployed, very low share actually receive benefits
Wage subsidy programs often unfocussed, unmonitored, ineffective and inefficient
Relatively high operating costs, especially MEI and RS EI
Employment Institutes: Reform suggestions
Institutional and operational issues: Set up new, small agency at State level In FBIH: Hercegovacki-Neretvanski Employment Service
to join FBIH EI structure as Cantonal EI Strengthen program monitoring and evaluation
capacities
Policy issues: Unemployment benefits: increases in replacement rates
and duration not justified by regional comparators and BiH’s level of income and available resources
Decrease spending on wage subsidies in FBIH and MEI Focus more on pre-lay-off job search services and
general job-search Build on Pilot Emergency Labor Redeployment Project
(PELRP) lessons
Pensions: Improving financial discipline, transparency and accountability
Significant steps made towards stabilization and sustainability of the pension systemsKey: aligning benefit levels with present and future resource realities so as to avoid running arrearsCritical to short-term financial sustainability: cash rationing rule tying pension levels above minimum to availability of regular pension resources on a monthly basis, by application of pension coefficient
Pensions: Improving financial discipline, transparency and accountability
Medium-term reform priorities: stabilize contributions, strictly stick to cash rationing rule and pay pensions on time. Further stabilization requires:
Continued economic growth Regularization and formalization of W&S payments,
expansion of formal sector employment Severance payments – no pensions! No payroll contribution exemption/relief Enforce existing financial planning and reporting rules
for the pension funds
Initiate thinking about systemic reforms through joint working groups
Summing up…
Reforming veterans’ benefits key priority in reforming cash transfer systemNeed to free up resources from veterans’ programs for social welfare and child protection programs, while working on improving access to productive employment opportunity for persons with special needs and ability to workNeed to ready employment services for expected increase in demand for services due to economic restructuringReform agenda supported under SOSAC II