Coverage Scenario

Bangladesh and Sri Lanka may be able to improve the adequacy of the noncontributory benefits without imposing an unmanageable fiscal burden on government finances. All three countries currently provide benefits equal to less than 4 percent of GDP per capita, which suggests that benefits could be raised. The same would apply to India if only the federal IGNOAPS is considered.

The second scenario explores the projected impact on expenditures if benefits increase to reach national poverty lines. Bangladesh is projected to undergo the highest rise in expenditures relative to scenario 1 because of the ninefold increase in benefit levels from Tk 500 to Tk 4,483 per month assumed in scenario 2 (figure 8.8). This scenario still takes demographic change into account, but it does not assume an increase in coverage rates. A more modest increase in benefit levels will result in correspondingly lower expenditures.

In addition to enhancing benefit adequacy, Sri Lanka (and India, if one considers only the IGNOAPS) may also have room to boost coverage while keeping costs below 1 percent of GDP by 2050. Scenario 3 assesses the fiscal impact of increasing benefits (as in scenario 2) but also raising coverage to 50 percent of the population above retirement age (figure 8.9). Because coverage is already at 46 percent of the population above retirement age in Bangladesh, this scenario has negligible impact. It does, however, matter in the case of India and Sri Lanka, where noncontributory pension programs only cover 18 percent and 26 percent of the elderly, respectively.

FIGURE 8.8 Projected Expenditures, Increased Benefit and Unchanged Coverage Scenario

Source: Calculations based on data of ASPirE (Atlas of Social Protection indicators of resilience and Equity) (dashboard), world bank, washington, dC, http://datatopics.worldbank.org/aspire/.