By Massimiliano Paolucci, World Bank Country Manager for Kosovo and North Macedonia
Originally published in Albanian in Gazeta Express on 22 September, 2022
There is growing alarm in Kosovo over rising prices for food, electricity, fuel, and firewood. This is not unwarranted. As elsewhere around the world, inflation is straining Kosovans’ budgets as incomes fail to keep pace. The situation is particularly dire for those already living in poverty or close to the poverty line since they spend a greater proportion of their income on food, energy bills, and home heating. Even small price increases threaten these households’ ability to meet basic needs.
That is where social protection programs like pensions, social assistance, and labor market programs play an important role in safeguarding the poorest and most vulnerable. Investing in well-functioning social protection systems is not just a moral imperative, it is smart economics. These programs are an investment in Kosovo’s future—essential to promoting healthier and better educated children and assisting young people in finding jobs. And when the poor are supported and given opportunities to improve their livelihoods, they are less likely to leave the country in search of a better life—helping keep valuable human capital and skills in Kosovo.
Is Kosovo’s social protection system responding well to the numerous crises—the war in Ukraine, the ongoing COVID-19 pandemic, and rising food and energy prices—facing the country? I would argue that much still needs to be done to better protect poor households. While Kosovo allocates a significant portion of its budget to social protection programs, their efficiency and redistributive impacts need improvement. To truly unlock these systems’ potential to support individuals, families, and communities in the face of economic shocks, they must be overhauled and redesigned.
The shortcomings in Kosovo’s social protection system are most apparent with the Social Assistance Scheme (SAS), which faced an 8.4% funding decrease between 2009 and 2019 after adjusting for inflation. The number of households receiving SAS benefits also dropped over roughly the same period, from more than 40,000 in 2005 to roughly 25,600 in 2020. This is partly driven by the fact that very poor households are often not SAS-eligible: of the poorest 20% of Kosovo’s population, only about one in four people receive SAS benefits. This is because the eligibility criteria are stringent and inflexible. Households must either have all adults defined as ‘dependent,’ meaning they are not required to work, or one adult must be registered as unemployed and caring for a child younger than five or an orphan under age 15. These same households must also have a low income, few assets, and poor living conditions. Such restrictive conditions likely encourage individuals to seek informal employment and exclude many working poor households and those with multiple children all over the age of five, which face higher expenses and needs.
As currently designed and despite the Government’s recent efforts to increase monthly stipends paid to beneficiaries, the SAS does not provide an adequate safety net for many poor families in Kosovo. This was especially apparent during the pandemic when SAS was unable to expand to reach households that had fallen into poverty or out of the labor market because of closures—necessitating the Government to rapidly launch a new program (Measure 15) to fill this gap.
Our analysis suggests that revising the SAS design by selecting beneficiary households on their poverty status only—considering both formal and informal income—would significantly increase its equity. This would enable the SAS to better mirror the country’s poverty profile and create a legal foundation to expand the scheme’s coverage when poverty dynamics in the country change and more budget resources are made available to finance poverty-targeted programs. Recent experience has also demonstrated the need to invest in the scheme’s delivery systems, including an integrated data management system to understand who is receiving which benefits. Payment systems must also be modernized to increase transparency and accountability over use of taxpayer funds. These reforms are a critical first step towards ensuring that the country’s poorest are protected today and into the future.
We stand ready to support the implementation of such efforts, starting with the strengthening of the current system through the World Bank-supported SAS Reform project, currently awaiting ratification in Parliament. This project will provide funding for investments in the SAS delivery systems and increase the value of SAS benefits to mitigate the economic impacts of the unfolding crises facing Kosovo.
The time to act is now. The costs of not doing so will be severe and long-lasting for the country’s future and will leave Kosovo’s poorest and most vulnerable behind.