In-depth | Poverty

Poor help to the poor

By - 30.06.2022

Kosovo’s social assistance program confronts long overdue reforms.

Social assistance programs in Kosovo that support the poorest parts of society continue to have more demand than they can meet. Many families that have no employed people in the household receive their only income from social assistance schemes financed by the state budget.

Kosovo is one of the poorest countries in Europe and has a high unemployment rate of around 26%. Around 23% of the population lives at or below the poverty line. In March this year alone, around 26,000 families benefited from the state social assistance.

But there are long-running debates about the design of the social assistance scheme, which has been in place since 2003. Successive governments have promised — and some have taken steps — to reform the system. Currently a special draft law to amend the existing law is awaiting government approval.

The main criticisms towards the design of the social assistance program is that it does not include all citizens who need it, discourages beneficiaries from seeking employment and that the provided aid does not cover the needs of beneficiaries. However, it remains the only state program that exists to specifically help those in poverty.

To reform social assistance in Kosovo, the government led by Vetëvendosje (VV) has sought financial support and expertise from the World Bank. In October 2021 an agreement with the World Bank was signed which would provide financial support in the form of a 47 million euro loan. But the government is having trouble getting this agreement ratified in the Assembly.

Although the government says that this loan will be used to pilot social assistance reforms, there is no information on what the reforms would involve, how the pilot program would be carried out or whether this reform is related to ongoing initiatives to change the law on social schemes. Those who oppose the agreement argue that the loan will only be used to cover the costs of direct payments to social assistance beneficiaries, which costs the state budget more than 30 million euros every year.

A report from GAP Institute argues that obtaining a 47 million euro loan, of which about 43 million would go to direct payments to families that are part of the scheme, is financially unnecessary and may serve as a bad precedent in the future.

How is poverty identified?

According to the World Bank’s classification, social assistance schemes are one of the four pillars of social protection, which also include social services, social security and labor market programs. Social schemes aim to protect people from falling into poverty and provide support at certain points in life or in response to specific vulnerabilities. This includes government-funded programs, such as basic pensions and financial assistance for families and children.

Data on people living in poverty in Kosovo has not been updated since 2017, yet the targeting of beneficiaries who need assistance is still done using the data from five years ago. The latest data published by the Kosovo Agency of Statistics (KAS) and the World Bank for 2017, shows that the poverty rate in Kosovo was 18%, while extreme poverty was 5.1%.

These categories were defined using two different definitions for poverty lines. Those living on 1.85 euros per day were classified as living on the edge of poverty, as this sum was considered sufficient to meet basic needs. Meanwhile, those living at 1.31 per day were considered to be in extreme poverty.

However, the number of families living in poverty or extreme poverty in Kosovo may have increased. As prices rise, so does the poverty line; 1.85 euros per day in 2022 is likely no longer on the edge of poverty, but would classify someone as in extreme poverty. In May this year, prices were 12.5% higher than in May last year, while wages in both the private and public sectors have remained almost unchanged. Disruption of the global supply chain as a result of the pandemic and the war in Ukraine has significantly affected Kosovo due to high imports.

According to the World Bank report for Kosovo for 2022, about 7% of the general population benefit from social assistance, although the official poverty rate is about 20%. Only one in four people in the lower quintile — the group with the lowest incomes — receive social assistance.

Poverty assistance

Kosovo’s social assistance program includes about 20 schemes targeting specific groups. The only social assistance scheme that covers a wider range of the population is that of the basic pension, which is financed from the state budget and includes all citizens of Kosovo over the age of 65. For all other schemes, beneficiaries must meet specific criteria.

All social schemes combined cost the state budget over 400 million euros per year, with an average of only 32 million being targeted towards impoverished people.

The law on the social assistance scheme was drafted and came into effect in 2003. According to it, the families that are able to apply for this scheme need to belong to one of two categories.

The first category includes families in which all family members are dependents, that is, they are unable or not required to work.

The second category includes families with a member that is able to work, but is unemployed and has at least one child under the age of five or an orphan under the age of 15 in their care.

A family is accepted into the social assistance program after applying to local institutions and presenting the necessary documentation. Families must pass a means test that gives a score based on source of income, household composition, asset ownership and living conditions. Furthermore, the state checks the formal income reported by the beneficiary families to the tax administration on a monthly basis. If the family moves above the eligibility threshold, they are excluded from the program.

Families entering the first category are entitled to temporary social assistance for one year, while those in the second category are eligible for six months. To renew, families in the first category must apply every year, while those in the second category must apply every six months.

But according to the World Bank, such restrictive conditions exclude the working poor and may create incentives for beneficiaries to work informally or obtain disability status to maintain eligibility for the scheme.

The amount given to the beneficiary families of this scheme depends on the number of family members. From 2003 to 2004, the amount of social assistance ranged from 34 euros for a family with one member to 112 euros for families with 15 members. Nearly two decades later, this amount has increased by only 26 euros for single-member families — who now receive 60 euros. Families with 15 members now collect 180 euros, 68 euros more than in 2003. Families selected in this scheme receive a monthly allowance of 5 euros for every child under the age of 18.

However, the amount of social assistance has not increased according to the increasing cost of living over the years. If we take the amounts offered per family member, we can see that a family with three members receives 1 euro per day per member. Meanwhile, a family of 15 members receives 40 cents per day per member. These amounts are below the poverty line.

What’s next for social assistance?

In 2017, when the Democratic Party of Kosovo (PDK), the Alliance for the Future of Kosovo (AAK) and NISMA were governing in coalition, the Ministry of Labor and Social Welfare approved a 2018-2022 strategy, which in addition to identifying problems with the social assistance scheme, required amendments to its legal framework. The strategy also led to the drafting of a concept paper, which was adopted in 2020, that provided for the amendment to the social assistance scheme law. But with the frequent changes of government over the past three years, there is still no new law.

The concept paper called for changes that would remove the previous criteria and expand the selection and benefit access to all households that consider themselves poor and unable to meet basic consumption needs.

According to this concept document, in addition to monetary benefits, the beneficiaries of the social assistance scheme will be entitled to a number of other benefits and exemptions, such as subsidies for utility bills, and medical or education expenses.

According to the World Bank, if this reform is implemented and the total value of benefits distributed to social assistance beneficiaries remains unchanged, impoverished beneficiaries would be identified more accurately and the number of families with children on the scheme would increase by 25%. According to them, such a reform would be the most sustainable and economical alternative for addressing child poverty in Kosovo.

The draft law on changing social schemes was part of the legislative program for 2021 but it was not approved by the government. The draft law is also part of the legislative program for 2022 and is expected to be approved by the government at the end of November.

Feature image: Atdhe Mulla / K2.0

This publication was published with the financial support of the European Union as part of the project “Citizens Engage”, implemented by K2.0 in partnership with GAP Institute. Its contents are the sole responsibility of Kosovo 2.0 and GAP Institute and do not necessarily reflect the views of the European Union. 

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