Annex G
SOCIAL IMPACTS OF THE FINANCIAL CRISIS: DFID
COUNTRY OFFICE REPORTS
DFID's country offices have provided a brief
situation report on the economic and social implications of the
financial crisis, giving a "snapshot" of what is happening
at household level in the countries where we work. The key headlines
regarding the social impacts are presented below.
A. IMPACTS
1. Impacts are starting to be seen across
more countries. However, more than half of the snapshot reports[56]
highlighted the lack of real time social impact data. In Bangladesh,
Indonesia, Malawi and Central Asia DFID offices have commissioned
their own rapid research.
2. Poverty levels are projected to be
increasing. Whilst in many countries the impact of the crisis
on national poverty figures has not yet been assessed in Indonesia
projections from the Government indicate 2-3 million "new
poor" in 2009-10 as a result of crisis.[57]
In Tajikistan the anticipated 30-40% decline in the remittances
inflow may result in a 15-20% increase in poverty.[58]
There are media reports of increasing cases of suicides in one
region due to the increasing poverty. Unofficial estimates in
Pakistan suggest that the poverty headcount may have increased
from 22% in 2006 to between 35% and 40%.
3. The impacts of the 2008 food
price increases are starting to become apparent. Evidence
from food security assessments released since the last snapshot
indicates that a number of countries saw declines in food security
as a result of both domestic factors and the food price crisis.
This may result in the poorest households entering the financial
crisis with a depleted asset base. In Afghanistan in 2008 the
average household spent between 75% and >80% on food, compared
to 56% in 2005. Assessments also found that 35% of households
were eating below their daily requirement.[59]
In Kenya, a 2008 survey[60]
found that between 2007 and 2008, the percentage of Kenyans
unable to meet basic food needs in rural areas rose from 44% to
a startling 77%.[61]
Yemen imports 91% of its wheat and 100% of its rice and was particularly
impacted by the food price crisis. Estimates of the impact range
from the elimination of all the poverty reduction gains over the
past 10 years (World Bank) to a doubling of extreme poverty
(UNDP). Some countries highlight that it is difficult to distinguish
the impacts of ongoing domestic crises and the compound effects
of the food, fuel and financial crises
4. However, whilst prices have declined,
in many countries they remain higher than before the crisis. In
most cases[62]
this is attributed to domestic factors such as market failures,
government demand for stock replenishment, adverse weather conditions
and seasonality. In Ethiopia, prices are above global market levels
and food inflation in February 2009 was 61.1%.[63]
Even higher increases are reported in rural markets and in conflict
areas. This has resulted in an increase in the numbers of people
dependent on food aid.[64]
In Afghanistan wheat prices have declined slightly but the prices
of other commodities have risen significantly and are expected
to remain well above historic levels. In Pakistan, year on year
food price inflation was at 22.9% in February 2009, compared to
34.1% in August 2008.[65]
In Bangladesh, food prices are 20% higher than before the spike.
5. There are concerns of continued food
insecurity in 2009. In Zambia an assessment in December 2008 identified
674,000 people needing immediate food assistance, due both
to food scarcity and higher prices. In Nigeria there are fears
that poor households could face moderate to extreme food insecurity
before the lean period throughout the country. Although in Uganda
food and fuel prices have fallen in recent months recent analytical
work based on household survey data from 2006 suggests 700,000 people
living near the poverty line may have been affected by the increasing
food prices since mid 2007.[66]
Schools in Uganda have also been cutting back on the amount of
food provided to pupils due to higher food prices. In Tajikistan
food security monitoring in 2008-09 found that half of surveyed
households were reporting worse economic situations in late 2008 than
a year ago and 31% of the population is categorised as food insecure.[67]
6. There are signs in rural areas where
the poor are net sellers of food of increasing food prices having
positive effects. Research from Ethiopia indicates that price
increases seem to have had a marginally positive impact on rural
areas as 45% of the population are net food selling households.
Similarly, in Vietnam 59% of poor households are net sellers of
rice[68]
and UNICEF estimates that the overall increase in food prices
will benefit rural areas, helping reduce poverty further.[69]
7. The effects on the urban poor are
highlighted in many country reports. This is due largely to
job losses (Vietnam and China) and the ongoing higher prices of
food (Nigeria, Ethiopia, Uganda and DRC) which continues to negatively
impact net food consumers. In Vietnam, rapid assessments suggest
that demand for casual day labour has decreased by 50% (70% for
construction). In DRC, there is anecdotal evidence of families
in Kinshasa returning to "delestage"—where
half the family eat one day and the other half the next day.
8. There is some evidence that the urban
poor are vulnerable to poor working and living conditions and
are less well covered by social protection programmes. In Vietnam
urban migrants in the informal sector have limited access to personal,
state or private sector safety nets. Few have fixed assets, many
are in temporary accommodation, and access to basic social services
is constrained. In Cambodia there are reports that overtime pay
is down and workers are leaving the garment factories as salaries
are inadequate to meet rising prices. In Indonesia, whilst Government
social protection schemes in rural areas are well functioning,
urban and peri-urban areas are far less well covered and it is
feared this is where the most significant impact of the downturn
will be felt. Migrant labourers in China are de facto excluded
from critical social protection programmes. Many of these restrict
support to those unable to work, which automatically excludes
unemployed migrant workers. Due to the prevailing registration
system they may also be excluded from access to public services
in both labour-receiving cities and labour-exporting rural areas.
9. The financial crisis and reduction of
job opportunities has raised concerns about the treatment and
violation of migrants' rights in Russia. It is reported that there
are frequent attacks on migrant workers and xenophobic behaviour.
According to official data[70]
in 2008, 600 dead bodies of migrants were sent to Tajikistan
from Russia.
10. The vulnerability of migrants returning
from urban to rural areas is highlighted (China, Vietnam, Cambodia
and Burma). In China, estimates by the Ministry of Agriculture
suggest 20 million migrants have returned to rural areas.[71]
These are known as the "three withouts": people who
have no land to farm, no other available jobs and no stable source
of income. In Cambodia about a quarter of a million workers migrate
to other countries, much of this informal migration to Thailand.
A large portion of these migrants are expected to lose their jobs
due to the effects of financial crisis in host countries.
11. There are concerns of social unrest.
With unemployment at 48.2% in Tajikistan[72]
and not enough employment opportunities for the thousands of laid-off
labour migrants the risk of social unrest is "high"
in the coming months. In Vietnam strikes doubled in the first
three months of 2008 as migrants saw their wages eroded by
high food prices[73]
and there are fears of social unrest. In the DRC, with a population
already disgruntled with a non performing government, the impacts
of the downturn could be a further source of malcontent and social
unrest remains a "real threat".
12. NGO budgets are being impacted by
the downturn and unfavourable exchange rates. Malawi, Uganda
and Bangladesh report reductions in NGO budgets and the possibility
of scaled back programmes. In Malawi Action Aid is shedding 31 of
87 country staff and Tearfund plans to wind down its projects
earlier than planned. Such cuts will have a negative effect on
poor and vulnerable households who were accessing services and
such households may find it difficult to build resilience.
B. RESPONSES
13. Kenya, Indonesia, Bangladesh and Nigeria
have established taskforces and committees to monitor the impacts
of the crisis and potential responses. Analysis and data collection
is occurring in Ghana and Vietnam with donor support.
14. In some countries, a change in the discourse
around social protection is noted. Although Tanzania is assessed
by the IMF and by DFID as not being particularly vulnerable to
the crisis, the global interest in social protection has fuelled
the local discourse.[74]
In Pakistan the PRSP finalised in January 2009 gives greater
emphasis to social protection measures than the previous strategy.
In Zambia, a number of donors[75]
in country have become more vocal about the need for social protection
measures since the start of the crisis. In Uganda, recent discussions
with the Ministry of Finance indicate that the government will
now accept a new cash transfer scheme.[76]
15. Many countries[77]
are introducing new programmes or scaling up existing social protection
programmes.
16. China is one of the clearest examples
of where the crisis is seen as an opportunity to rapidly expand
the social security system. The authorities have recently announced
that £85 billion (RMB 850 billion) will be spent
over the next three years on increasing and improving health care
coverage.[78]
Parts of the fiscal stimulus will also directly address the social
impacts of the crisis. Support for the health sector is also being
enhanced in Ghana where the Government is proposing free/cheaper
access to health insurance for children.
17. Income support is being scaled
up in some countries. In Ethiopia, the wage rate in the Productive
Safety Net Programme (PSNP) will increase in 2009 (on top
of the 2008 increase) and a greater proportion of the transfer
will be in food. A new risk financing mechanism will allow the
PSNP to be further scaled up if necessary. In Ghana the LEAP Programme
will be expanded in 2009 to cover 35,000 extreme poor
households (compared to 8,000 in 2008). In Pakistan the Benazir
Income Support Programme has been launched. With a budget of £300 million
for 2008-09 this will provide income to 3.4 million
eligible families. The Government expects to increase coverage
by 2010-11 to 7 million families—or 25% of the
population.[79]
In the Kyrgyz Republic there has been a moderate increase in social
benefits including a 20% increase in pensions from April 2009.
Social assistance measures including the Unified Monthly Benefit,
the Monthly Social Benefit and the Guaranteed Minimum Consumption
Level have been scaled up to help mitigate the impact of rising
prices on the poor. Yemen has also increased the number of beneficiaries
of its Social Welfare Fund.[80]
18. Ghana has introduced support for basic
schools through provision of free uniforms and exercise books.
The school feeding programme will be extended to cover all public
primary schools. Micro-credit schemes are also being expanded
in Ghana to cover rural finance and particularly rural women entrepreneurs.
19. Support for the agriculture sector is
being scaled up in some countries. In Ghana the Government is
looking into ways of encouraging more youth to be engaged in agri-business
since agriculture has the greatest potential for the creation
of more jobs. In Tanzania the government intends to concentrate
on farm input subsidies and investment in longer term agricultural
productivity.[81]
The Government of Pakistan will provide additional support to
the agriculture sector through a 20% increase in the wheat procurement
target compared to the previous year, and greater credit to the
sector.[82]
In Yemen the Government has responded to the food price increases
through a push for greater cereal production.
20. Employment support has been enhanced
in a number of countries. In Cambodia, although the Government
has tended to play down the crisis it has nonetheless begun to
develop a policy response including developing a more comprehensive
social safety-net for the poorest and training schemes for laid
off workers.[83]
In Vietnam, additional funds have been allocated to a national
job creation programme, providing preferential credit for vocational
training and help for those who have lost jobs to find alternative
employment. A $1 billion stimulus package includes interest-free
loans for enterprises which have cut more than 100 workers
or 30% of staff. This will pay salaries, social and unemployment
insurance. The Government has also introduced a new Rapid Poverty
Reduction Programme to address chronic poverty in 61 districts.
21. Despite fears of declines in aid flows[84]
in many cases donors are scaling up their support to government
social protection responses.[85]
22. In Malawi some donors[86]
are planning to scale up their support in agriculture and infrastructure.
In Zambia the EC has provided extra funding towards an urban food
voucher scheme. In Yemen the EC has €6 million euro
to compensate for food price rises and the World Bank has provided
$10 million for an extended public works programme. In Vietnam
the Australian Government is reviewing its programme in the light
of the crisis and the EU is considering more focus on poverty
reduction.
23. In Kenya, an additional $50 million
programme is about to be considered by the World Bank to support
the OVC programme (joining DFID's Social Protection programme).
This has been under development for some time, but the Bank do
consider it as contributing to their response to the global crisis.
24. In Pakistan the World Bank will support
social protection through: a Poverty Reduction Support Credit
as a budgetary support operation; a Social Safety Net Development
Policy Credit (in the order of $200 million); and the Social
Safety Net Technical Assistance Credit (in the order of $60 million).
USAID has signed an agreement with WFP valued at $22.4 million
to provide food for 2,710,000 individuals, (including 405,000 primary
school students) in the North West Frontier Province, Balochistan,
and parts of Sindh province. The EC has selected Pakistan as one
of the beneficiaries of its global food facility. EUR50 million
would be made available for agricultural productivity and direct
food transfers.
25. In Cambodia donors have agreed to identify
key programmes that might provide employment or facilitate growth
and find ways to speed them up. The World Bank has committed $10m
earmarked for social protection.
26. A response from Zambia highlighted the
potential tension between policies targeted at the "new poor"
resulting from the financial crisis and policies targeted at the
chronically (often rural) poor. In Zambia 85% of the poor live
in rural areas in much greater poverty than the urban poor. However,
there is a risk that in response to the global crisis, social
protection plans could be targeted towards people directly impacted
eg relatively wealthy unemployed miners living in towns, at the
expense of Zambians living in extreme poverty and vulnerability
with or without the crisis. Cambodia raises a similar point; although
the economic crisis is pushing both donors and the government
to pay more attention to social protection, there is evidence
that the people being most strongly affected by the crisis are
not the poorest.
56 Bangladesh, Burma, Cambodia, Central Asia, Indonesia,
Pakistan, Vietnam, Burundi, Ethiopia, Malawi, Nigeria, Rwanda,
Sudan, Tanzania, Uganda, Zambia and Caribbean. Back
57
Bappenas presentation to ASEAN Conference on the Social Impact
of the Economic Crisis, 24 February, 2009. Back
58
This is based on the WB analysis that "the remittances in
Tajikistan have contributed by half to the significant reduction
of poverty level from 80% in 2003 to 53% in 2007". Back
59
National Risk and Vulnerability Assessment. Back
60
Kenya Food Security and Steering Group. Back
61
59% to 71% in urban areas. Back
62
Zambia, Ethiopia, Ghana, Nigeria, Uganda, Afghanistan, Tajikistan. Back
63
The price of maize is 130% than the 2004-08 average. Back
64
Estimated to be 4.6 million in January 2009 and expected
to rise. Back
65
Trends in Inflation, State Bank of Pakistan, http//www.sbp.org.uk Back
66
This data has not been released yet and could be sensitive. Back
67
Food Security Bulletin-1, Food Security Monitoring System, WFP,
November 2008. Back
68
Impacts of Rising Food Prices on Poverty and Welfare in Vietnam,
Linh Vu & Paul Glewwe, 2008. Back
69
Aggregate Shocks, Poor Households and Children: Transmission Channels
and Policy Responses, Mendoza, UNICEF, December 2008. Back
70
Migration Service of the Ministry of Interior Affairs, Republic
of Tajikistan. Back
71
The number of 20 million is not precise, and different critiques
suggest it may be higher as well as lower. The numbers would be
much higher if un-and under-employed migrant workers remaining
in cities were included. Back
72
UN. Back
73
UNICEF. Back
74
Although it is noted that there is some conflation of short term
crisis mitigation with permanent social protection plans.. Back
75
Such as the European Commission and the World Bank. Back
76
This is partly to do with the personalities involved, rather than
the impacts of the global slowdown. Back
77
Ethiopia, Ghana, Kenya, Bangladesh, Central Asia, China, Pakistan,
Vietnam and Yemen. Back
78
This is in addition to the fiscal stimulus measures announced
in November 2008. Back
79
In January 2009 the Cabinet agreed upon a reform process
for the BISP around three broad themes: (a) improvement of the
targeting and beneficiary enrolment process; (b) use of proxy
means testing (a poverty scorecard) to make decisions about eligibility;
and (c) establishment of effective institutional arrangements
for managing the programme administration and monitoring. This
reform will form the basis for streamlining and consolidation
of similar cash transfer programmes and moving from a universally
targeted wheat subsidy to a targeted one. Back
80
Although this relates to a broader process of reform to improve
pro-poor targeting. Back
81
This will be achieved through front-loading $200 million
of IDA funds. Back
82
WFP Food Security Market Price Monitoring Bulletin (6), January
2009. Back
83
However, all measures proposed in the "fiscal stimulus"
package already feature in the government's budget, so cannot
be considered as additional or as a direct response to the crisis. Back
84
Although donor budget cycles may mean that any declines will not
be seen for several months. Back
85
This excludes DFID support, information on which was not requested
in the snapshot exercise. Back
86
IFAD, USAID and MCC. Back
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