Tracking Global Social Protection Responses to Price Shocks
This note provides an update of social protection responses to the food, fuel, fertilizer and other price shocks sparked or accelerated by the Ukraine war.
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This note provides an update of social protection responses to the food, fuel, fertilizer and other price shocks sparked or accelerated by the Ukraine war. The vast majority of measures were introduced in early 2022 (February-April), although some specific interventions to mitigate prices were included in late 2021. This initiative complements two other ongoing thematic trackers of country-level action on how social protection is being leveraged in crisis situations — one on COVID-19 responses and another one focused on displacement as a result of the Ukraine war.
Data is preliminary and meant to elicit comments, additions, integration and revisions to be incorporated in next living paper versions. Specifically, the note tracks four broad measures, namely social assistance, social insurance, labor markets and subsidies. The latter includes five subcategories, i.e., fuel, food, fertilizers, agriculture inputs and fees subsidies. Data and analysis are preliminary, and more information on specific measures will be provided as data becomes available. To this effect, continuous monitoring of data and responses is ongoing. Suggestions on materials and measures to be included in future updates are welcome and could be signaled to the World Bank team directly — contact ugentilini@worldbank.org and malmenfi@worldbank.org.
Introduction
As of April 29, a total of 84 countries announced 221 social protection schemes in response to soaring prices of food, fuel, fertilizers and other items. Subsidies, such as fuel and food subsidies, were the most widely used policy instrument by significant margin, i.e., constituting 79% of the total response. In contrast, social assistance programs, such as cash and in-kind transfers, constituted 17% of the response. Social insurance and labor market measures were not broadly deployed, with single-digit numbers of schemes.
Examining regional and income group distributions, only two regions — North America and the Middle East and North Africa (MENA) — have less than 70% of their subsidy response. In contrast, sub-Saharan Africa’s response is almost entirely based on subsidies, with only 8% of the region’s response being social assistance. Low- and middle-income countries (LMIC) also were high in subsidies (above 80% of the total response), whereas high-income countries (HIC) were slightly less than the global average (75%).
Subsidies
Subsidies are being put in place across four main categories, including in relation to fuel, food, fertilizers and various forms of fees. These are discussed in the remainder of the section individually. Overall, food subsidies represent a sizable share of subsidies in MENA and South Asia, while fuel subsidies constitute a large percentage of measures in Africa, East Asia and the Pacific (EAP) and Latin America and the Caribbean (LAC). In the latter, fuel subsidies involve over one-third of subsidies. North America features fee subsidies as the sole subsidy response. Fees subsidies were the most used subsidies in all income groups except for LMICs. Their share our of total subsidies was over 76% in HICs and 65% in upper middle-income countries (UMIC), whereas in low-income countries (LIC) and LMICs, the measure represented 48% and 25% of the total, respectively. Food subsidies were the most common subsides in LMICs with 40% of the response compared to LICs (13%), UMICs (8%) and HICs (only 4%), while fuel subsides’ share was roughly in line with the global share of 21% across income groups. Finally, LICs and LMICs’ share of fertilizers subsidies was more than double that of HICs and UMICs.
Fuel Subsidies
In general, 30 countries have implemented 36 measures to reduce fuel prices through price control (fixing prices) and fuel subsidies (covering for part of the fuel cost). On the latter, there are 23 measures. For example, Liberia announced on April 1, 2022, that the price of gasoline has been reduced by $0.61, while diesel fuel is reduced by $0.53. Some countries (e.g., Italy and Philippines) have provided vouchers to subsidize fuel. For example, Philippines has recommended additional fuel vouchers for farm producers by increasing the budget to 1.1 billion pesos from 500 million. Also, there are 13 measures which have implemented price control on fuel. For example, in Hungary, the price of gasoline and diesel was capped at a max of €1.30 (November 2021) for a duration of three months. And, on February 12, 2022, this measure was extended for another three months.
Food Subsidies
There are 23 measures across 21 countries which have reduced the prices of food, either through food subsidies or price control. A total of eight measures have been implemented for food subsidies. For example, in March 2022, Bangladesh launched a nationwide special food subsidy program for cooking oil, lentils and other staples. Mostly targeted at rural areas, the scheme provided food at reduced prices to 10 million poor people and will run until the end of Ramadan. Similarly, Gabon announced that it would subsidize the price of food items such as flour. Some 15 programs relate to price control on food and other essential items. For example, Comoros issued an order to limit the prices of certain food item, such as sugar, flour, condensed milk, oil, sardines, concentrated tomato, mineral water, beef and chicken, all of which are subject to a price floor and ceiling.
Fertilizer Subsidies
The fertilizer/agricultural subsidy recorded 11 measures across nine countries to support farmers with agricultural inputs (such as seeds, fertilizers, agricultural equipment, etc.). For example, Mauritius distributed fertilizers to registered small tea platers via a voucher. The voucher indicated the quantity of fertilizers the tea plater is eligible for, and the funding for the financial year 2021-2022, it was increased from 5 million Indian rupees to around 12 million Indian rupees. Also, on April 19, Azerbaijan provided subsidies for an amount of 21.6 million manat ($12.7 million) to 44,423 farmers for autumn crops.
Fee Subsidies
Fee subsidies are the most extensively used intervention with 105 measures across 51 countries. Exemptions for or reduction of taxes accounted for about 60% of the measures. These are followed by subsidies for water, electricity, telephone, internet, etc., accounting for close to quarter of the measure (25 measures). The rest of the measures account to about 5% of the measures.
Taxes
About 60 measures from 36 countries, such as Argentina and Estonia, have either exempted or reduced taxes. The type of exemption or reduction is applicable to both direct tax (e.g., income tax) as well as indirect taxes (e.g., value-added tax (VAT), excise duty, customs duty, etc.). All the exemptions or reductions, except for a few, e.g., Egypt, related to indirect taxes.
Among indirect taxes, we recorded import taxes (in four countries), VAT (in 14 countries) and excise duty (in 25 countries). Countries have mostly reduced import taxes, except in Gabon, and these were imposed on essential goods, including food items. Niger, for example, lowered the customs tax on food items to 3.5% for millet, 35% for flour and 17% for sugar. In terms of VAT, around 10 measures related to energy (fuel, electricity), and 11 relate to food, hygiene products, etc. For example, Poland reduced VAT on fuel from 23% to 8%, on electricity and heating to 5% and removed VAT on natural gas and basic food items. Likewise, Turkey will lower VAT to 1% on all kinds of certified seeds and saplings. Finally, excise duty measures were exclusively imposed on electricity and fuel. For example, the U.S. Maryland Governor announced a 30-day suspension of the gas tax with the option to extend up to 90 days, and the measure is estimated to represent $100 million per month. Finally, South Africa has temporarily reduced the fuel levy by 1.50 South African rand per liter from April 6, 2022, until May 31, 2022. The measure is funded through the liquidation of a portion of the strategic crude oil reserves.
Governments have also provided tax rebates. For example, the state of Georgia in the United States announced a program to give between $250-500 in tax refunds. Similarly, as part of its new CO2 subsidy policy, New Zealand plans to provide rebates to low-emitting vehicles. Countries have implemented tax cuts, tax rebates and reliefs. France, for example, announced plans to further cut taxes on transport costs by 10% for commuters. Similarly, Austria implemented the “commuter euro,” which reduces income tax levies by €2 per kilometer in the distance between the place of residence and workplace. This policy is expected to cost €400 million.
Subsidies on services, including energy, housing and transportation
The measures under this section discuss a wide range of subsidies relating to various services ranging from energy, such as electricity and heating, to housing and transportation services. There are 25 measures across 18 countries related to electricity subsidy, except for three on heating. Some programs have experienced vertical expansions. For example, in March 2022, Ireland announced that electricity credit payments to households doubled to €200. The €200 electricity credit would be automatically applied to domestic electricity customers’ accounts and will appear either as a credit on the bill or as a top-up on the prepay meter. Other programs have experienced both horizontal and vertical expansions. For example, as part of the Warm Home Discount scheme, the United Kingdom plans to provide a rebate of £150 on their energy bills. The scheme will cost £475 million a year and will cover nearly 3 million households. Previously, the rebate was £140 and used to cover 2.2 million households. Similarly, in October 2021, Estonia announced an energy price subsidy for low-income families, where, if the price goes above €60 per megawatt hour, the difference will be compensated directly to these families.
Next, there are three measures relating to housing. In Sweden, for example, the housing allowance for families with children will be temporarily increased from July to December 2022. Similarly, to protect the interest of tenants, Guinea has set a limit on rental advances to three months.
There are four measures with regards to subsidies for transportation services. Comoros, for example, provided free and special transportation services to farmers to transport their local agricultural products to Moroni, Mutsamudu and Fomboni. On the other hand, New Zealand and Germany have subsidized public transportation services. For example, New Zealand plans to cut public transport fares by 50%.
Price control measures and loans
There are two measures relating to loans and other financial obligations. In Canada, changes were made to the Advance Payments Program to support farmers ahead of planting season by allowing them to access 100% of their 2022 cash advances and waiving off their timed installments. This would improve cash flow and allow farmers to purchase fuel, fertilizer and seeds. Next, countries have also implemented price control on electricity. For example, Bulgaria opted to freeze power regulated electricity and heating prices until the end of March 2022.
Miscellaneous policies: energy efficiency, export and import restrictions, rationing of goods
To promote efficient energy use, a range of countries (e.g., Australia and Thailand) are subsidizing electric vehicles. For example, Thailand provides subsidies to passenger cars per electric vehicle unit depending on its battery capacity. Passenger cars with 10 to 30 kilowatts per hour batter capacity will receive a 70,000-baht ($2,111) and passenger cars with over 30 kilowatts per hour batter capacity will receive a 150,000-baht ($4,523) subsidy.
Another way in which governments are managing prices is through export restrictions and rationing, such as in Congo Republic, Sri Lanka and Turkey. For example, in March 2022, Turkey imposed temporary export bans on select products such as grains, oilseeds, cooking oil and other agricultural commodities. Finally, in mid-April 2022, Sri Lanka’s state-owned petroleum corporation announced fuel rationing for vehicles.
Social Assistance
Social assistance includes 37 measures across 25 economies, thus representing 17% out of all social protection measures. Responses mostly comes in the form of cash transfers (79%), followed by in-kind measures (13%). A total of 19 countries have implemented unconditional transfers, a level much higher than the four conditional cash transfers in two countries. At present, school feeding and social pension programs only represent a slim fraction of social assistance (8%). Overall, the balance between the establishment of new policies and the adaptation of existing measures is 59% and 41%, respectively.
Unconditional cash transfers are present in countries like Poland, Austria and Denmark. The Netherlands, for instance, is disbursing €2.8 billion for a one-off energy allowance for low-income populations. Cash transfers are also provided with food security objectives in the United Kingdom and Argentina, and as a form of compensation for fuel costs in Guatemala and Sweden. Governments are also conditioning cash transfers to install renewable and energy saving materials and handing out cash to purchase electric vehicles, such as in Cyprus and Sweden. Finally, some countries have also adopted measures to protect the most vulnerable, disabled and elderly people, for instance, by increasing pensions and retirees’ incomes, as in the case of Argentina and Greece, where the latter planned to dedicate a budget of €1.1 billion.
To a lesser extent, support is also provided in the form of in-kind transfers. Countries like Mali and Djibouti are providing food assistance and livestock. In Romania and Macao, governments also provide vouchers for basic food products and medical care, respectively.
Social Insurance
Social insurance accounts for a very limited share of current responses. Only three measures were recorded, both of which are adaptations of preexisting benefits. In Belgium, the government supports small and medium enterprises by providing 70% of the average incomes of all workers placed on extended temporary unemployment until the end of June 2022. In Egypt, the government allocated 190.5 billion Egyptian pounds (or about $10 billion) to increase pensions by 13%, coming into effect from April 2022.
Active Labor Market and Economic Inclusion Programs
Labor market programs predominately include wage subsidies, especially in Europe and Central Asia region, as well as East Asia. In Romania, the government is adjusting the minimum wage of workers while covering 75% of the gross wage to employees temporarily dismissed in companies which were directly or indirectly affected by the war in Ukraine. Similarly, Hong Kong plans to spend 12 billion Hong Kong dollars to revamp its support to companies that hire new employees with incomes below the threshold of 30,000 Hong Kong dollars per month. In order to preserve 2.96 million jobs, Malaysia planned to disburse 20.63 billion Malaysian ringgits ($4.9 billion) in wages subsidies.