Economists tip treasury on social cash transfer

The Economists Association of Malawi (Ecam) says government needs to implement other initiatives to, among others, avoid duplication and ensure sustainability of the social cash transfer programmes in the country.

Ecam executive director Frank Chikuta told Business News that this is to ensure growth in the social protection bill by targeting only the intended beneficiaries and seal leakages.

Chikuta observed that as the economy grows, a gradual increment in the government’s contribution to the social protection programmes is possible, with minimal impact on the sustainability of both the social programmes and the fiscal framework.

He said: “Ideally, national social protection programmes should be financed by the government, because donor support is subject to sudden decreases as it depends on the financial status of the donor and demand for the same resources in other countries.

“However, given the current state of our economy, donor support is still very critical to the implementation of the programmes.”

The sentiments follow revelations from the United Nations Children’s Education Fund (Unicef) that the need to maintain the sector at the status quo (supporting only the bottom 10 percent of ultra-poor and labour constrained households across the country with no seasonal and emergency top-ups) would require approximately K24 billion.

This is despite Treasury increasing its funding to the social cash transfer programme (SCTP) from K650 million in 2016/17 to about K3 billion in 2020/21.

According to Unicef, over 90 percent of the on-budget social protection resources are from donors.

In relative terms, government has been contributing an average of five percent to the funding of the SCTP between fiscal years 2017/18 and 2018/19, with the huge chunk (95 percent) of the SCTP resources coming from donors.

In the 2020/21 financial year, K37 billion (92 percent) of the on-budget social protection resources were financed through an on-budget grant.

For instance, as of 2020/21, government was contributing to the funding of only one district under the SCTP.

Meanwhile, funding from the German Government, through KfW, is expected to expire in June 2022, while funding from the EU, will expire in February 2024.

In contrast, funding from the World Bank, Irish Aid and the Government will last until fiscal year 2024/25.

In an interview earlier, Minister of Finance Felix Mlusu said the Covid-19 pandemic was making sustainability difficult as economies had to recover first.

He said: “With the ravages of the Covid-19 to the world economy, it would be difficult for any country to sustain expected levels.”

The SCTP is oriented towards the extremely poor, covering about seven percent of the national population as of 2020, while the Government recognises that 51.5 percent of the population lives in poverty and 20.1 percent are extremely poor.