Social security and welfare sector

Social security and welfare expenditures increased sharply in 2005 and again in 2009, increasing from $4.4 mill in 1995 to $38.7 mill in 2005, before decreasing to $23.5 mill in 2006. The budget estimates for 2009 indicate expenditures of $54.9 mill in this sub-sector, more than doubling the 2008 figure of $26.5 mill. Rates of increase fluctuated (Figure 10), but the steady commitment of the social budget to this sector is evident from the stable shares attributed to it. This sub-sector absorbs approximately 10% of social expenditures during 2005-2009 (average).

 

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Per capita spending on social security and welfare has increased from $24 in 2000 to a maximum of $131.8 in 2005, before declining to $78.2 in 2006. They reached $60.3 in 2007, $85.5 in 2008 and doubled to $174.5 in 2009. In terms of averages, per capita social security and welfare spending has increased from an average of $33.5 during 2000-2004 to $106.1 during 2005-2009.

The government has put in place several programs to protect the poor and vulnerable, including (a) an absolute poverty scheme initiated in 2003 under which a monthly allowance is disbursed to highly vulnerable individuals who are below the poverty line of Rf 20 per day ($1.56 per day), or about $48 per month (b) assistance to obtain school materials for children of low income families, (c) assistance to seek medical treatment from hospitals in Maldives or abroad, (d) assistance to obtain assistive devices for the disabled and drugs for the mentally ill, and (e) institutional care for orphans and mentally disabled persons. A health insurance system for all and a social pension for citizens over 65 has been introduced in 2009, explaining some of the increase in expenditures.

Following the tsunami, the government disbursed emergency income support to the affected population. Approximately $4 million was disbursed to about 63,000 tsunami-affected families as targeted cash- assistance, implying a per family benefit amount of $65. Other than tsunami-assistance, some of the other social assistance programs are summarized below in Table 10.

 

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Social protection, however, has been assessed as not being equitable. The tsunami assistance, for example, was by nature temporary, while the conventional safety net programs have left critical vulnerable groups omitted. Recurrent transfers covered only 0.3 percent of the population and 1.6 percent of the poor; total safety net spending (outside of the tsunami benefit) is 0.2% of GDP. In addition, the safety net system has very low levels of benefits relative to the level of income of the Maldives. However, if pension payments are taken into account, and the new social pensions were to be factored in, the assessment looks more favorable.

As in most countries, poverty analysis suggests that the transient poor, who move in and out of poverty, outnumber the chronically poor, but also that the characteristics of both groups of the poor are similar. The highest incidence of poverty/vulnerability is in the Northern atolls, among household heads with little or no education, a large number of children, elderly, and without working members. Some (but not all) among the widows and divorcees may also be highly vulnerable. However, the largest group of the poor and vulnerable are households with many children, and households whose heads are jobless and/or with little education and/or female-headed. Ninety percent of the poor live in the atolls; the Northern and North-Central regions alone now contain more than 60 percent of the country’s poor.

Economic growth has been the dominant factor in the reduction of poverty in Maldives, but there has been a disjuncture between growth and equity. The concentration of poverty in the Northern Atolls and among particular population groups is of considerable concern, and requires public interventions aimed at greater redistribution of the gains of economic growth. Despite efforts, the existing arrangement of social assistance and social insurance as well as their mode of delivery leaves considerable sections of the population vulnerable to aggregate and individual shocks. Aggregate risks include the most recent impacts of the tsunami that caused large-scale loss of incomes and assets, environmental risks of global warming leading to a rise in sea levels, increasing fiscal deficits, and population ageing. The most significant individual shocks reported by survey results are health risks and joblessness, with health shocks causing the largest and most frequent shocks to household incomes. The list of other possible risks include social risks, the use of drugs, and the social exclusion of the disabled, elderly and orphans. The main coping mechanisms used by the poor are informal insurance and personal savings and income, and limited public support (government support was used for coping in about 10 percent of shocks while income transfers to the elderly only flow to public sector retirees). Intra-household transfers are roughly equitable between terciles (Table 10). Private transfers, remittances, and alimony are also not pro-poor. When all private transfers are combined together, they are about equitable across terciles. This is not surprising. Evidence from other countries is similar. The poor “help’ the poor via private transfers. Government assistance, when including contributory pensions, on the other hand, is significantly inequitable inasmuch as the share of the richest consumption tercile is highest.

 

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The Maldivian Government is currently developing an effective umbrella of social protection for the country that is consistent with its level of income, implementation capacity and social risk mitigation objectives. Seeking to address these issues, the government is currently in the process of reforming its public pension system to provide broader income support. Notably, in spring 2009, the government introduced a universal social pension for all citizens above 65 years of age. This is a noteworthy innovation.

The government is also interested in developing social protection for the very poor, and those who may fall into poverty from health shocks, natural disasters or joblessness. There is an equally compelling need to ensure the protection of growing numbers of low-skilled expatriate workers – most of whom work in the construction and tourism sectors.

Source : UNICEF ROSA (2009)

Social security schemes and programs by branch