The IMF prescription of direct cash grants for the poor may work satisfactorily if the poor segment is small. It may be possible for advanced countries as the percentage of poor is small, and most are in temporary poverty. Sri Lanka’s situation is different because the majority are poor and wish to be in poverty forever to enjoy social welfare. The rest of society and the macro economy can’t maintain such a large number (50%) who don’t contribute to the economy. According to the Sri Lankan political culture and habits of the people, this will be a permanent feature, and future governments will not be able to get rid of it. As we do not have a good database, enjoying this benefit by ineligible families can’t be prevented like the Corvid Relief package in 2020/21. It was enjoyed by about 65% of the families. Instead of reinforcing the culture of handouts dependency, the following ideas would be helpful to redesign the entire poverty alleviation program to a sustainable, growth-oriented one.
The underlying principle of restructuring the national poverty alleviation program is that nobody except the vulnerable should receive cash or material benefits for an extended period without contributing to the economy. Therefore, a multiple approach for poverty alleviation is proposed. (a) Employment guarantee program for people who belong to the workforce but are unemployed or under-employed (b) Direct, adequate, criteria-based cash grants to vulnerable families that can’t work, (c) Temporary relief for the people affected by economic crisis, (d) Support to small and medium enterprises to create sustainable, productive wage employment to elevate the poor above the poverty line,(e) provide employable skills for school leavers, (f) Relocation of isolated unviable poverty pockets, (g) Caring for people who do not have caretakers. The above seven components are discussed below in detail.
3.1 Employment for Everybody (Employment Guarantee Scheme)
As discussed above, most Samutdhi recipients are in the labour force; hence, they can be easily diverted to an Employment Guarantee Program. Most of the public assets, including infrastructure, have been neglected without regular maintenance, and after several years, maintenance is capitalised and rehabilitated under the capital budget. This happens because a significant share of the budget goes to welfare expenditures, leaving little for asset maintenance. Therefore, it is proposed to redesign the Samurdhi program as ‘Cash for Work’ or a ‘Public Work Program’ or an ‘Employment Guarantee Scheme’. An island-wide public work program should be set up for this purpose. Under such a program, repairs of roads, government buildings, irrigation schemes, landscaping in public places, forestry programs, coast conservation, flood protection, river and road reservation maintenance, etc., are a few possible activities that will increase the stock of national assets. Then poverty alleviation becomes economically productive and anti-inflationary in the long run.
Before introducing the Janasaviya and Samurdhi Programs, Sri Lanka had the experience of establishing temporary relief work camps (cash for work) in drought-affected areas to satisfy the people’s basic needs until they get back to farming. Most needy village/agriculture infrastructure facilities were provided /rehabilitated through relief work camps (public work programs). This program worked as an employment guarantee scheme during natural disasters. When villagers could not find jobs with a decent wage or couldn’t do farming, they had the opportunity to participate in those work camps and get paid a minimum wage for such periods/ days/. Later, the World Food Program adopted a similar approach called ‘Food for Work’. The implementation modalities of the proposed employment guarantee scheme are explained in detail in the annexure to this article.
3.2 Social Safety Net for the Absolutely Poor
The second component of national poverty alleviation is the Social Safety Net. Needy families with no family members to participate in the employment guarantee scheme or who don’t have other sources of adequate income (disabled, older adults, women-headed households/widows with small children or students, chronic diseases, pregnant mothers etc.) must be adequately supported by direct cash grants depending on the family size and the nature of difficulties to satisfy the minimum basic needs. Beneficiary families shall be identified through an Island-wide impartial systematic survey like the survey conducted in 1978 to determine the absolute poor. The list of beneficiaries shall be updated annually to accommodate changing circumstances of the household to increase or decrease the allowance and to pave the way for exit-entry and reentry-exit. Along with this program, other assistance, such as Kidney patients’ allowance, pregnant mothers’ allowance, etc., must be terminated.
Along with the above two programs, annual household surveys should be undertaken, like preparing a household list in the past. Before 1978, this was done by a small number of Grama Niladaries in a larger area with minimal resources and transport facilities. Today, it is possible to do more accurately and efficiently with many officers, small precincts, better transport facilities, Information technology, etc. Annual updating of the household survey could be combined with the annual updating of the electoral list. Such a comprehensive database helps improve the efficiency and effectiveness of many government programs.
3.3 Facing the Immediate Shock of the Economic Crisis
If there is no immediate intervention by the government, many families may face food insecurity during the present economic crisis. Some estimates say about 40% of the total number of families are food insecure. According to the Samurdhi survey, about 50% of families are impoverished. The balance of 60% or 50% can’t maintain the poorest 40% or 50% because their real income also has decreased by nearly 100% due to hyperinflation. Many lower middle-class families may soon fall below the poverty line.
Immediate actions are essential to prevent further impoverishment. Cash grants for many families are impossible, as experienced in the COVID-19 relief program. Under these circumstances, to redress the real poor and the people on the poverty edge, selected 8-10 essential food items, including milk powder for the infant, and about 50 items of commonly used medicine prices shall be reduced. This may be done by price subsidising, removing all taxes, and allowing imports to be competitive without quotas. This benefit will be enjoyed by well-to-do as well. However, it should be disregarded to avoid the high degree of malpractice and complications in targeted cash grants. Further, it must be limited to a specific period without making it a permanent feature.
To be continued