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