Safety Nets in Transition Economies A Primer

This paper focuses on the experience of the transition countries of Central and Eastern Europe and Central Asia in providing adequate safety nets for the poor during the last 10 years. The paper discusses the problem of poverty and vulnerability – who were the poor, and how did the answer to this question change over the decade, it looks at the typical types of interventions offered by governments, and how this package changed over the period. It surveys the evidence on effectiveness of these programs in reaching the poor, in reducing their income poverty, or reducing other aspects of poverty (e.g. social exclusion). The results are quite striking, as in all countries, classic targeted safety net policies played a small role in reducing poverty. In part, this was because of the uniqueness of the period – conventional good practice was not always applicable. Recently, several countries in the region have improved the coverage and targeting of their programs, offer good models for other countries. If all middle income countries in the region adopted these models, including insuring adequate financing, effective poverty reduction at low cost is possible. Financing for this benefit could come from reducing expenditures on untargeted categorical benefits and energy subsidies. Low income countries may find that implementing a full means-tested cash benefit system is too costly and administratively complex, although it should be noted that Armenia and Albania have both implemented programs successfully. These countries may wish to try less complex solutions such as distributing food rations through schools or school feeding programs. Fee waivers or subsidies to improve access to social services for the poor could also be