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PRESS RELEASE

World Bank Bolsters Social Protection Reform in Ukraine with New Loan

July 3, 2014

US$300 million to revamp social safety nets

WASHINGTON, July 3, 2014 – The World Bank’s Board of Executive Directors today approved a US$300 million loan for the Social Safety Net Modernization Project in Ukraine to expand a targeted social safety net program that will help the most vulnerable and socially excluded people.

“The new project will help improve the performance of Ukraine’s social assistance and social services system for low-income families,” said Qimiao Fan, World Bank Country Director for Belarus, Moldova, and Ukraine. This help for the poorest is critical, especially as Ukraine embarks on a series of essential reforms, including raising gas and heating tariffs. We don’t want the increase in tariffs, for instance, to have an undue impact on the most vulnerable.”

He added: “We welcome the country’s commitment to taking the necessary steps to reform the current social protection programs based on the needs of the poorest. Ukraine can harvest the benefits of these much-needed measures only if the Government moves decisively to implement its ambitious reform agenda.”

This new investment will help to expand a cash-transfer program, or the Guaranteed Minimum Income (GMI) program, to cover those most in need. It aims to support high-priority measures for more efficient administration of social benefits and services through strengthening performance management to be supported by the national management information system. This will be done across all local offices under Ministry of Social Policy’s subordination. The number of individuals receiving GMI is expected to almost double from 586,000 in 2013 to 1.1 million in 2019.

In addition, the project will directly address the needs of orphans and disabled orphans in four selected regions (oblasts). They will benefit from a full range of social welfare services that the project will help design and implement. About 35,000 disabled children under the age of 18 and 13,000 orphans and children deprived of parental care are expected to benefit from the project.

This new six-year project is part of the World Bank Group’s overall assistance to Ukraine announced in March this year, which aims to provide up to US$3.5 billion by the end of 2014.

The World Bank is a major development partner of Ukraine. With this new investment, World Bank’s active lending portfolio will amount to US$3.69 billion through 12 operations in the country. Since Ukraine joined the World Bank in 1992, the Bank’s commitments to the country have totaled over US$8.5 billion for 44 projects and programs.

Background Note

The new Social Safety Net Modernization Project is the third project financed by the World Bank and executed by Ministry of Social Policy of Ukraine. The Ministry implemented the following World Bank projects and grants: Ukraine Social Investment Fund (USIF) project (2002 – 2008), the Social Assistance System Modernization (SASM) project (2006 – 2012), a number of Japan Policy and Human Resources Development (PHRD) project preparation grants, and a Swedish International Development Cooperation Agency (SIDA) grant to co-finance the SASM project. The Ministry is currently implementing a Europe and Central Asia Capacity Development Trust Fund (ECAPDEV) managed by the World Bank.

In Ukraine, about 9 percent of the population is considered poor by national standards. Ukraine uses multiple poverty measures. For instance, 4 million people are considered poor based on equalized total income below the Subsistence Minimum that was set in 2012 at 1042.4 UAH per adult equivalent a month. According to the relative definition of poverty (poor individuals are those with total expenditures per adult equivalent below 75% of the median), about a quarter of the population was poor during 2010-2012. About 11% was living in extreme poverty (extreme relative poverty is measured as percentage of individuals with total expenditures per adult equivalent below 60% of the median), which is also the commonly used domestic definition of poverty. Only 2.3% of the population was living below US$5 in purchasing power parity (PPP) terms per adult equivalent a day in 2012, or the international absolute poverty line for the Europe and Central Asia (ECA) region. Ukraine’s income inequality is among the lowest in the ECA region, with a Gini index of 24.3 during 2011-2012.

Ukraine has a large number of children in institutional care and associated service provision, responsibility for which is scattered between Ministry of Education, Ministry of Health, and Ministry of Social Policy.

In total, over 61,000 children are in institutional care in Ukraine, or 0.6% of Ukraine’s children. Ukraine has developed several national strategies and state programs aimed at de-institutionalization of orphans and children deprived of parental care and the development of alternative forms of care for them.

The new project will help to implement these programs by providing orphans and children deprived of parental care with a family environment through foster care, adoption and placement in family-type homes. The project aims to assist in transforming residential institutions and in purchasing new services from private and non-governmental providers for vulnerable families. These activities will be implemented in line with individual action plans to transform residential care into family-based care.

About the World Bank Group

The World Bank Group (WBG) is one of the world’s largest sources of funding and knowledge for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which together form the World Bank; the International Finance Corporation (IFC), the Bank’s private sector arm; the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in the mission to fight poverty and improve living standards for people in the developing world. For more information, please visit www.worldbank.org,  www.miga.org, and www.ifc.org.

 

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PRESS RELEASE NO:
2015/012/ECA