‘Double-digit poverty remains stubbornly high’

The World Banks urges Russia to create a new national programme to help people who fall below the poverty line

Poverty rate in Russia has slightly decreased since peaking at 13,3% in the third quarter of 2020, but the figure remains in the double digits jeopardising the Kremlin’s ambitious goal of halving the poverty level by 2030.

Russia needs a more scalable and inclusive social safety net system to meet its national goal of halving poverty by 2030, says the World Bank. According to the bank’s experts, the country has admirably contained additional spikes in the COVID-19 induced poverty rate, mostly due to various compensatory social policies, such as the increase in unemployment benefits, child allowances and support to single-parent families. Given that the economic recovery continues gathering pace, the World Bank expects Russia’s poverty rate to decline to 11,4% by the end of 2021.

Nonetheless, the experts consider that strong economic growth alone will not be enough to achieve Russia’s goal of halving poverty by 2030, as “double-digit poverty remains stubbornly high”. “We believe that [the growth] will need to be complemented by a social safety net system that is more scalable and inclusive,” they say in a commentary pointing out that the current welfare system transfers around only 10% of the total social assistance budget to the poor. To meet Russia’s strategic goal, the country’s safety net should be capable of addressing the complex financial, health, labour market and long-term care needs of the poor and vulnerable.

As a concrete example of how a scalable and inclusive safety net can be weaved, the World Bank suggests a national programme to help people who fall below the poverty threshold. Under the programme, these people are meant to be provided with an income-gap-filling payment combined with incentives to graduate them out of poverty through labour activation support. “With many caveats, such as excellent targeting, we estimate the lower-bound cost of such a programme to be around 0,3% of GDP”.

Besides, the bank’s experts note that Russia’s policy responses to rising food prices, such as export bans, quotas, tariffs, price caps and subsidies, have been politically attractive and administratively easily implementable but economically distortive. According to a recent study by the Higher School of Economics, the beneficiaries of those measures were Russian producers and non-sanctioned importers, while for Russian citizens, consumer losses amounted to 2,000 rubles per capita. As the low-income families and poor are disproportionately affected by food price increases, a better approach to help them would be to improve the targeting of Russia’s social safety nets in order to reduce food insecurity and poverty, concludes the World Bank.

By Anna Litvina

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