TOWARDS A MOZAMBICAN SOCIAL PROTECTION FLOOR - ILO
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United Nations
Mozambique
Delivering as One
TOWARDS A MOZAMBICAN SOCIAL PROTECTION FLOOR
Consolidating a comprehensive Social Protection System in Mozambique - Analysis of Policy
Alternatives and Costs
Victor Lledó, IMF
Nuno Cunha, ILO
Luca Pellerano, OPM and IFS ( in absentia)
Johannes Mueller, IMF ( in absentia)
Yung Xiao, IMF ( in absentia)
Patrick Giton, IMF ( in absentia)
Workshop on Policy Options for Effective and Sustainable Social Protection Floors
1
• Mozambique is a mature stabilizer as a result of sound macroeconomic management and structural reforms
• Compared to its peers, its macroeconomic indicators are strong and continue to improve.
• Mozambique has had successive non‐financial program with the IMF (PSI). The current program will run until 2016.
Real GDP Public Debt
(Percent change from previous year) (Percent of GDP)
14 160
Mozambique 140
12
Mozambique
120
10
Trendline 100
8
80 Trendline
6
60
4 40
Sub-Saharan
20 Africa
2 Sub-Saharan
Africa
0
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2
• The poverty rate has been stagnant between 2002/03 and 2008/09, at about 55 percent.
• Economic growth has been less pro‐poor than in other successful countries.
• Economic growth has been less pro‐poor in the recent period.
• Poorer segments of the population have not benefited from economic growth.
• Urban Riots occurred in 2008 and 2010.
Elasticity of Mozambique's national poverty The growth incidence curve shows that growth has
line headcount poverty rate with respect to been non-pro poor over the last decade
growth in real GDP per capita
2002/03-2008/09 0.04
1996/97-2008/09 0.44
1996/07-2002/03 0.86
0.0 0.2 0.4 0.6 0.8 1.0
3
Authorities’ Action •1st pillar: Enhancing production and productivity in agriculture
Plan For Reducing •2nd pillar: Promoting employment
Poverty (PARP) •3rd pillar: Furthering human and social development, including
2011-14 by enhancing efficiency and coverage of basic social security
•Coordinator: Ministry of Women and Social Action (MMAS)
•Targeted population: Children, elderly, disabled, women and
Authorities’
poor households
National Strategy
•Components: Cash transfers, social services, labor intensive
for Basic Social
public works
Security (ENSBB)
•Targeted coverage: 371,000 in 2013; possibly 815,000 in 2016
•Budget allocation: 0.35 percent of GDP for 2013
• World Bank-SP Assessment; Support to Public Works Programme and
administrative system development with 50 M USD loan starting from July
2013 with implementation from July 2014
Pilot International
• IMF-Fiscal space assessment, advocacy and public financial management
Cooperation
• ILO-UNICEF-WFP Policy development, administrative and financial
information management, and field implementation and on-the-job
training to local and central authorities
4
Source: IMF estimations, based on IMF Country Report No. 13/1
Mozambique: Creation of Fiscal Space
• Over 2011‐2022, an additional fiscal space of
(Cumulative during 2012-2022, percent of GDP) about 2.3 percent could be created for all
5.0 government’s priority spending programs About
half of (1.2 percent) by expanding the overall
4.0
spending envelope. The other half (1.1 percent)
3.0 by reprioritizing its spending programs, mainly
2.0 through the phasing out of the costly and ill‐
targeted fuel subsidy.
1.0
• There are countervailing developments at work:
0.0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 • Building on the strong rise in revenue collections
-1.0
since 2005, the authorities expect a further
-2.0 increase in the revenue effort going forward.
Fiscal revenue
-3.0 • By contrast, external grants are expected to
Grants for budget support
-4.0 Spending Reprioritization decline from the peak of the global crisis.
External loans for budget support
-5.0 Domestic financing
• External financing could temporarily fill the void,
Total fiscal space but with limits in order to preserve debt
-6.0
sustainability.
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 • There is small room for more domestic borrowing
(Percent of GDP) so as to avoid a crowding out of the private sector.
Total fiscal space 25.6 26.2 26.7 26.8 27.1 27.5 27.8 27.8 27.8 27.7 27.9 27.9
• Further fiscal space could be created if:
Source: IMF estimates (IMF Country Report No. 13/1)
• The taxation of the booming natural
resource sector can be improved.
Sources: IMF estimations, based on IMF Country Report No. 13/1
• More donor resources can be tapped
5
Source: IMF estimations, based on IMF Country Report No. 13/1
2011 2012 2013 2014 2015 2016 • The projected creation of fiscal
(Percent of GDP) space to enhance the expenditure
Creation of fiscal space 1/ envelope and the envisaged
Fiscal revenue 22.2 23.9 23.1 23.3 23.9 24.7
reprioritization of spending will
External grants for budget support 3.4 2.0 1.8 1.5 1.3 1.1 allow accommodating two main
External loan for budget support 0.2 0.9 1.5 1.3 1.1 0.9 spending priorities going forward:
Domestic financing 0.9 0.0 0.6 0.8 0.8 0.8 • Investment to close the
Fuel subsidy 1.1 0.6 0.3 0.1 0.0 0.0 infrastructure gap.
Total fiscal space 25.6 26.2 26.7 26.8 27.1 27.5 • Expansion of social protection.
• In the baseline projection, social
Outlay of fiscal space 1/ protection under the ENSSB could
Investment 5.7 6.0 6.4 6.5 6.8 7.2 rise to 0.7 percent by 2016 and
Social protection 0.2 0.2 0.5 0.6 0.6 0.7 reach 1½ percent of GDP over the
Other current spending 19.7 20.0 19.8 19.7 19.7 19.7 medium term.
Total fiscal space used 25.6 26.2 26.7 26.8 27.1 27.5
• How much the Government could
allocate to social protection
1/ Excluding grants and loans earmarked for investment projects. programs depends on the
Source: IMF estimations, based on IMF Country Report No. 13/1 government’s objectives for the new
social protection package (in
competition with other spending
priorities), the absorption capacity
of the institutions that implement
the new programs (especially at the
district level), and the speed with
which the government can upgrade
its capacity..
allocate to social protection
6
Majority of the population is highly
vulnerable
• Big share of the population near the poverty line
• 55% are below the poverty line +10% (transient)
• High dependence on subsistence farming, exposure to
weather shocks , high dependence on ODA
• Food insecurity patterns highly correlated with
climatic cycles
Leading to high
• Between the months of December and vulnerability to small
March FI levels rise to around 40% income variations
• About 20% of the population is food insecure
• 44% of the children below 5 are chronically
malnourished
Intergenerational poverty
trap threatening the
country’s future
7
• Has one of the oldest non-
contributory cash-transfers
The Programmes:
in Africa – PSA (converted
PSSB – HH with no members able to work
into the PSSB)
`
(Elderly, PWD, CI)
• National Coverage ` PASD – HH with temporary incapacity to
• Until 2008 fully funded by work
internal resources ` PNASP – HH with capacity to work
• Broad and comprehensive (associated with PW)
legal and policy framework
• Social Protection Law (2007) -
establishes a funding mix
aligned with the SPF
• Regulation of BSS (2009) and
National Strategy for BSS (2010)
• Approval of new Programs by the
Council of Ministers (September
2011)
• Includes a more systematic
approach replacing the ad-hoc
programs
8
Founded on the ILO RAP model and building on an assessment of fiscal space by the IMF
country team, the sector assessment and vulnerability analysis (WB, 2011) the costing
exercise was based on:
demographic official projections
household micro-data
latest IMF macroeconomic projections
2012
•Costing the approved programs (the exercise assisted the
government in taking informed decisions).
•Measuring the fiscal impact of a potential expansion (the
targets do not represent yet the country full coverage needs)
•Scale up on the number of beneficiaries
•Increasing the transfer amount
Exercise 2015
Objectives • Paving the way for future improvements on the quality of the
system
•Informing on the costs of other policy options after 2014
•Splitting the cash transfers into two different components:
pension and child allowance
2022
9
Nr. of Beneficiary Households
Scenario A
1,800,000
` Compares Government’s current targets 1,600,000
up to 2014 with the estimated fiscal 1,400,000
space for Social Protection (IMF 1,200,000 PASP
projections) 1,000,000
800,000 PASD
◦ PSSB covering 80% of the eligible HH in 2014 600,000
with a transfer equivalent to 1/3 of the PL 400,000
PSSB
◦ PW covering 6% of Urban and Rural HH in 200,000
2014 (40% in 2022 for U.HH and 25% for 0
R.HH). Transfer equivalent to the PL. 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
` Shows financial capacity to reach the Total Cost as Proportion of GDP
targets without jeopardizing the fiscal
equilibrium 0.90%
0.80%
0.70%
` Estimates a potential positive balance to 0.60%
increase coverage further than current 0.50% PASP
targets 0.40%
PASD
0.30%
0.20%
PSSB
0.10%
0.00%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
10Scenario B
` Follows the current priorities in terms of extension
` Estimates the potential coverage if government allocates to SP the
1,50 % estimated as potential fiscal space for the area
` Would be possible to extend coverage in 2013 and 2014 without
jeopardizing the fiscal equilibrium (max. would be in 2012 with
1,59%)
` Main increase in Productive Social Action
◦ 40% of HH in Rural Areas in 2022
◦ 25% of HH in Urban Areas in 2022
Nr. of beneficiary households
2,000,000
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
‐
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
PASP PASD PSSB
11Nr. of direct beneficiaries (individuals)
` Scenario C 7,000,000
6,000,000
◦ Estimates the cost of 5,000,000
increasing coverage and 4,000,000
spliting current cash- 3,000,000
transfer program in a 2,000,000
Child-Benefit (80% of HH 1,000,000
with Ch.) and a Social ‐
Pension (80% of Elderly) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Child Benefit PASP PASD PSSB, then Social Pension
◦ Reducing the expansion
pace of PW Program
Total Cost as a Proportion of GDP
3.00%
◦ Transfer 1/3 P/L for CB 2.50%
and SP and PL for PW 2.00%
1.50%
1.00%
0.50%
0.00%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Child Benefit PASP PASD PSSB, then Social PensionMozambique : Outcome of Strong government
leadership & close UN/IMF collaboration
Nr. of HH (thousands) covered by INAS Programs
` Social Protection
gained a prominent 600 250 250
300
position in national 439 200
250
debate 400 371
130 130338 150
100 100254 287
200 70 197 100
` Invitation of Prime 167
50
Minister to ILO and
IMF to present the 0 0
case for inclusive 2008 2009 2010 2011 2012 2013 2014
growth and SP to the
Nr. of HH Beneficiaries Transfer amount (Mtm)
Council of Ministers
` Ò 2012/2013 and
likely 2014 in Evolution of Budget Allocation to INAS Programs -
National Budget and Absolute (Million Usd) and Relative (% of GDP)
new pledges from
0.60 100
development partners 0.51
(50 Mil. Usd loan 0.50 80
from WB)
USD - Million
0.40 0.34
% of GDP
60
◦ Ò nr. Of HH beneficiaries 0.30 0.23 0.24
0.21
◦ Ò Increase in the transfer 40
amount 0.20
0.10 20
0.00 0
2010 2011 2012 2013 2014
(CGE) (Lei) (Lei) (Lei) (Proposta) 13Mozambique : Key take-away messages &
Challenges ahead
` Low coverage of current
` Progressively building a Social programs
Protection Floor adapted to the ◦ Only 20% of poor households
country context:
` Fragmentation and duplication
◦ Enhanced coordination and better
◦ Affordability - does not prioritization
threaten fiscal sustainability
` Sustainability is not only a fiscal
concept - Implementation
◦ Reduce vulnerability and
◦ Can threat the implementation at field
promote gains in human level (lack of single-registry, efficient
capital and productivity registration and payment system)
◦ Lack of linkages between social
protection to key services, (education,
◦ Important contribution to health)
poverty reduction and national ◦ Lack of good monitoring the well-
being of beneficiaries through
social cohesion community case management
◦ Key element to guarantee ` Natural Resources
good economic and social ◦ Improve the fiscal contribution of the
environment essential to the mineral sector and use the additional
fiscal space for priority infrastructure
success of internal and and social investments, including
external investments social protection
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