Building Constituencies

Domestic fiscal space for CTs

  • domestic-fiscal_icon1African members that participated in the Livingstone meetings agreed that countries and development partners could together support a minimum package of social transfers (Taylor 2010).
  • domestic-fiscal_icon2Market-based growth and appropriate management of the macroeconomy, revenue from natural resources, improved governance and tax collection, debt relief, and donor support will continue to allow many Sub-Saharan countries to access additional financing for CTs.
  • domestic-fiscal_icon3Some countries fund social protection through their domestic budgets; others use financing, such as HIPC funds or anti-HIV funds, to support cash transfer programs.
  • domestic-fiscal_icon4The programs that Sub-Saharan African countries can afford will vary depending on the countries’ financial situation, and most countries will have to gradually allocate fiscal space for programs.
  • domestic-fiscal_icon5Properly designed and administered CTs offer potential cost savings over some of the past responses that governments have adopted to reduce vulnerabilities in times of economic crises and natural disasters.
    • Countries that introduce cash transfers in place of food subsidies may increase the efficiency of spending on social protection while removing the moral force of arguments opposed to phasing out certain subsidies. Such a phase-out of subsidies occurred as CTs were initiated in Mexico, Indonesia, Mozambique, and other countries.
    • Cash transfers that are part of national social protection programs may also be more efficient than small-scale programs implemented by multiple providers. A study in Kenya found that CSOs spent between 30 and 60% of their budgets on administrative or overhead costs (Devereux Pelham 2005). This percentage was significantly higher than that found in Kenya’s CT for OVC, where administrative costs were expected to be approximately 25% in 2012 and to drop thereafter (World Bank 2009). Administrative costs in other programs are estimated to be lower than those in Kenya’s program.