by Dilli Raj Khanal, PhD Presented to the Seminar on Income Security to Old Persons in South Asia Organized by ESCAP 27 Feb 2017, New Delhi

by Dilli Raj Khanal, PhD Presented to the Seminar on Income Security to Old Persons in South Asia Organized by ESCAP 27 Feb 2017, New Delhi

Table of Content Background Coverage, Benefit Level and Outreach Means Expenses Pattern and Funding Sources Impact on Relations, Status, Living Conditions and Poverty Some Emerging Issues and Lessons

Background Nepal has been far ahead of other South Asian countries in introducing Universal Social Pension to the Elderly Persons Back in the mid 1990s the old age pension was introduced with a monthly cash transfer of NRs 100 to citizens of 75 years and above. Thereafter, both coverage and pension amount has gradually been extended or raised so as to bring bout vulnerable and more disadvantaged people in the orbit of social protection and there by minimize their exposure to risk, improve their livelihood and social conditions. Today, universal social pension is a core pillar of the Nepal s social protection system. Noticeably, the new constitution gives highest priority to the social protection and underscores on the need of covering economically deprived, disabled and helpless, helpless single women, children, handicapped, people unable to care themselves and endangered citizens, among others. As a part of fulfilling such constitutional commitments, an integrated Social Security Act (2016) is in the process of enactment. Below Nepal s experience with universal old age pension is presented taking various related aspects into account. Some emerging issues and lessons based on the Nepalese experience are presented in the end.

Coverage, Benefit Level and Outreach Means Coverage Following persons are entitled to get universal social pensions (old age pensions) per month Senior citizens with the age of 70 years and above Senior citizens and dalits of Karnali with the age of 60 and above Single women with the age of 60 and above Additionally, following persons including children get monthly allowances Fully disabled Partially disabled Widow below 60 years Endangered people Children Thus, while designing or extending the schemes, priority has been given to extend the coverage taking vulnerability and exclusion factor into account.

Cont.. In terms of coverage, the number of people benefited by the old age pension ( 60 years and above) was 1.225 million in 2012/13. The number remained largely the same (1.223 million) by the end of mid-march 2016. The breakdown of beneficiary number as of mid-march 2016 is as follows: Senior citizen with the age of 70 and above: 7 lacks 92 thousand ( 2.8 % of total pop) Senior citizen of karnali with the age of 60 and above: 2 lacks 30 thousand (0.8 % of total pop) Dalit of Karnali with the age of 60 and above:. 27 thousand 36 hundred (0.1 percent of total pop) Single women with the age of 60 and above: 1 lack 73 thousand (0.6 % of total pop)

Cont.. The total number, thus, comes out to be 4.3 percent of total population. In 2015/16, the total population of age 70 and above and 60 and above was 3.5 and 8.4 % respectively. When other above five categories are included, the total number covered by social protection comes out to be 2.27 million ( including 1.04 million covered under above 5 other categories). This is equivalent to 8 % of total population. Single women below 60 years: 4 lacks 87 thousand ( 1.7 % of total pop) Fully disabled: 30 thousand 9 hundred (0.1 % of total pop) Partially disabled: 31 thousand 4 hundred ((0.1 % of total pop) Endangered people: 23 thousand 3 hundred (0.1 % of total pop) Children: 4 lacks 70 thousand (1.7 % of pop)

Cont.. Benefit Levels From 2008/09 to 2015/16 the benefit level fixed for 70 years age and above, single women of 60 years and above, Dalits and senior citizen of karnali of 60 years and above was Rs 500 per month. Similarly, up to last fiscal year endangered people and fully disabled were given Rs 1000 per month along with Rs 500 per month to the widow below 60 years age and Rs 300 to the partially disabled people. Children were provided Rs 200 per month. From this fiscal year 2016/17, the universal age old pension has been doubled and fixed at Rs 1000 per month. Such a benefit level has been doubled to others as well including single women, widow, Dalits, fully and partially disabled and endangered people. In addition, various health related extra facilities including lump sum amount of Rs 500 in a year is provided to the old persons of 60 years and above. With mounting pressures to upscale the monthly allowance due to inadequacy of the monthly allowance to fulfill daily necessities such a step has been take.

Cont.. Outreach Means Ministry of Federal Affairs and Local Development (MOFALD) is responsible to administer the social security allowances (SSAs) including old age pensions. Under the Ministry, Department of Civil Registration (DOCR) is mainly responsible to distribute and manage the program. The delivery of SSAs is largely based on the manual methods of record-keeping system. Enrolment of beneficiaries and renewal is carried out by the offices of municipalities and Village Development Committees (VDC) annually. The VDCs and municipalities forward the beneficiary rosters to the District Development Committees(DDCs) by distinguishing the beneficiary categories (e.g., old-age, single women, etc.) and then DDCs send them to the MOFALD. Although DOCR possesses a management information system (MIS), it currently covers the beneficiary records of only 25 districts out of 75 total districts. Ultimately, the payments is done by municipalities and VDCs through secretaries, three times in a year. Now there is added thrust on cash transfers through banking system.

Expenses Pattern and Funding Sources Unlike some apprehensions, total expenses on universal social pension for the elderly (60 years and above as classified above ) is still relatively low as a share of total spending on social protection, total expenditure and total revenue even after the doubling of monthly allowances in this fiscal year. In absolute term, total allocation to old age pensions (60+ years and above) reached NRs 14.7 billion in 2016/17 from the actual expenses of NRs 7.4 billion in 2012/13. However, based on the projected GDP, its share in GDP remains lesser than one percent in this fiscal year also at 0.59 percent from 0.43 percent in 2012/13. Its share in total social protection expenses declined to 15.3 percent from 19.6 percent during the same period. Similarly, its share in total allocated expenditure went down to 1.4 percent in 2016/17 from actual expenditure of 2.0 percent in 2012/13. As a share in total revenue also, there has been marginal increment from 2.5 to 2.6 percent during the same period. On the other hand, a sharp in rise in total expending on overall social protection (universal old age pension is a component) is taking place in recent years In absolute term, it was NRs 37.5 billion in 2012/13 and NRs 60.53 billion in 2015.16. For this fiscal year 2016/17, the allocation is in the order of NRs 96.1 billion. As a share in GDP, the ratio has reached 3.9 percent from 2.2 percent during the same period.

Cont.. In terms of share in total revenue, it reached 17 percent in 2016/17 from 12.7 percent in 2012/13 despite very satisfactory revenue performance in recent years, from 17.5 percent of GDP in 2012/13 to 20.5 percent in 2015/16 and expected 22 percent in this fiscal year 2016/17. These patterns show that retirement benefits which constitute almost two thirds of total social protection expenses and expenses falling under other different current expenditure heads are rising phenomenally. This is one of the reasons that government expenditure as a share of GDP is projected to reach 42 percent in this fiscal year from 21.2 percent in 2012/13. Noticeably, the share of current expenditure has remained above 60 percent in recent years posing major challenges to raise capital expenditure. With respect to financing, universal social pension to the old age population is exclusively funded by the domestic revenue sources.

Share of Old Age Pensions Expenses

Impact on Relations, Status, Living Conditions and Poverty Various studies carried out indicate that despite allowance being inadequate to fulfill daily necessities, it has had wide-ranging positive impact: Institutionalization of state support to the old people. Positive perception on the state. Social inclusion, self-esteem and sense of personal empowerment. Improved relations with families, communities and enhanced social status. Support to minimum needs and living conditions. Important contribution to meet basic necessities of older people and their families. Studies show that most beneficiaries spent their pension on essential food items, clothes and health. In many instances beneficiaries used to share their pension with their families including expenses on children s education.

Impact on poverty Except a simulation study back in 2004 showing old age pension reducing poverty by almost 1 percent, no recent quantitative studies of similar nature are available. Nonetheless, by comparing recently hiked allowance with the annual poverty threshold per capita income of NRs 19261 estimated for 2010/11, it is seen that annual pension is more than half of poverty line income. Assuming 40 percent price rise in the last 5 years, the poverty threshold per capita for today could be derived at NRs 26965. After adjusting the price effect, the pension share stands at around 44.5 percent and hence its contribution to reduce poverty of old persons can be assumed to be considerable and significant. Moreover, for the vulnerable families, the contribution in poverty reduction becomes even more crucial. The reduced poverty trend of Nepal additionally corroborates this. Apart from consumption based poverty (from 42 % in 1996 to 21.6 percent 2015/16), a sharp fall in multidimensional poverty has taken place, from 65 some years before to 44.2 % now).

Some Emerging Issues and Lessons Some Emerging Issues Adhoc /appeasement approach in design and implementation Institutional capacity and implementation constraints Low institutional capacity as a major bottleneck for regular and predictable deliveries of cash transfers at beneficiary's destination leading to, among others, exclusion errors and lower benefit levels. Four months long interval in payments amidst time lags in budget releases. Misuse and inefficiency in cash transfers in the absence of transfers through banks. Problem of transparency, coordination, regulation and monitoring Information gap and cumbersome registration problems leading to exclusion of many eligible persons. Poor recording and data base management system. Universal approach and equity issue. Trade off and sustainability problem amidst immense rise in retirement benefits and other recurring expenses. Such issues may compound further with increased pressure on reducing age limits, up scaling the monthly allowance and extending the coverage as per constitutional commitments.

Cont.. Some Lessons Nepal s experience shows that universal social pension is the most effective means of Income security of the old people including, as pointed out above, Improving relations with families and communities. Strengthening social inclusion, raising social status and enhancing the sense of personal empowerment, and Raising family wellbeing and reducing poverty. Some important lessons to be derived based on Nepalese experience include: First, there is a need of making age old pension as a part of long term comprehensive social protection system for minimizing overlaps, duplications and above all comprehend wider coverage. While doing so, a policy clarity on right based, universal and targeted social protection programs may be needed. Second and an offshoot of above, development of robust scaling up of pension and reviewing of old age limit criteria for eligibility may be needed for predictability and stability of the policy. Third, a new thinking in introducing some targeted approach within the universal scheme may be needed from the standpoint of taking care of most vulnerable old age persons and their families. From the equity point of view also such an approach may be desirable.

Cont.. Fourth, outreach and timely delivery in a monthly basis is a must through Capacity enhancement of implementation agencies and better coordination both vertically and horizontally Arrangements of cash transfers through banking system compulsorily and checking misuse and leakages Strengthening of flow of information, data management and monitoring system with focus on transparent and accountable system Fifth, sustainability should constitute an integral part of design and extension of universal social pension program in which two pronged strategy may be simultaneously needed Exploration of new and expansion of existing sources of funding exclusively aimed at universal social pension program Streamlining of budgetary allocation and management system through revamping of budgetary system. Finaly, larger donor support may be needed in view of social protection being as one of the pillars of the SDGs.