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Action now can help prevent Covid-19 pushing more Cambodians into poverty

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The Covid-19 cash transfer programme has been effective, and Cambodia can use this experience to develop stronger social assistance programmes to support the poor and those most vulnerable to future shocks. Hong Menea

Action now can help prevent Covid-19 pushing more Cambodians into poverty

Like most countries across the world, Cambodia has been hit hard by the shock brought on by Covid-19. This has greatly affected the country’s economic growth and government efforts to reduce poverty, with the number of people falling into poverty expected to swell by nearly one million.

The Cambodian government has already set up a comprehensive response and fiscal stimulus package to address the health and socio-economic impacts of the crisis. Actions include cash transfers to poor and vulnerable households, wage subsidies, low-interest loans and tax relief for businesses in hard-hit sectors, a cash-for-work programme in rural areas, and support to small and medium enterprises. A longer-term economic recovery plan to boost competitiveness is also underway, through investment in climate reforms and leveraging of digital technologies.

To help the government in these efforts, the World Bank is providing a $200 million development policy loan for the Cambodia Relief, Recovery and Resilience project. This focuses on timely and targeted relief to affected people, facilitating robust recovery through structural reforms, and building resilience against future economic shocks. It is designed in line with the Bank’s Green, Resilient, and Inclusive Development approach that tackles sustainability, resilience, and inclusiveness while providing immediate relief today.

The sectors most affected by the crisis – including garments, construction, and tourism – employ many people in the country.

Among non-agricultural jobs, the garment sector accounts for 16 per cent, construction 12 per cent, and the transport and hospitality sector 13 per cent of employment. The slowdown in these industries creates a serious challenge to sustained economic recovery, and in the absence of significant mitigation measures, the pandemic will result in further rises in unemployment and poverty.

Indeed, telephone surveys conducted by the World Bank show the employment rate has fallen by about 10 percentage points since the pandemic began. This decline, along with reduced demand for goods and services, has lowered incomes for many households. In February this year, two-fifths of households reported a decline in their total household income compared to pre-pandemic levels, while another 40 per cent reported no increase.

Household enterprises were one of the hardest hit sources of livelihoods. This will push thousands of families toward poverty, and the trend is continuing due to the ongoing and prolonged Covid-19 situation. To be clear, many people need assistance now.

To help stop Cambodia losing years of progress in reducing poverty, this project is creating fiscal space and strengthening social safety nets. It focuses on identified poor households (IDPoor) who have been registered through numerous initiatives, including a recently launched programme to support families affected by lockdown.

Major project targets in 2022 include providing Covid-19 cash transfers to 690,000 IDPoor households, plus 360,000 maternal and child health cash transfers to poor pregnant women and those with children.

The project will also support growth and enhanced resilience to future economic and financial shocksby improving trade competitiveness and the business environment. Credit is to be made available to 500 small and medium-sized enterprises next year through a risk‐sharing facility. By streamlining trade facilitation, the prices of imported goods consumed by poor households can be lowered.

This latest project builds and expands on the work of the Covid-19 Emergency Response Project approved in April last year, and other World Bank-supported projects designed to help Cambodians deal with the direct and indirect impacts of the pandemic.

The Covid-19 cash transfer programme has been effective, and Cambodia can use this experience to develop stronger social assistance programmes to support the poor and those most vulnerable to future shocks. This can be achieved by continuing current social assistance measures, instituting stronger post-pandemic assistance, and strengthening coverage and delivery systems, for example by broadening the IDPoor programme and transforming it into a social registry for other interventions. It is equally imperative that the systems for making payments to those in need are smooth, safe, and efficient – such as through multiple providers for the distribution of payments, and using digital payments. There is opportunity to use this crisis to identify other areas for increased digitisation.

Implementing such reforms will have practical and measurable outcomes, including allowing a greater number of people access to finance, as well as lowering transaction costs, improving management of public funds, and reducing leakage. The World Bank is supporting the government in these areas, and we are committed to helping the people of Cambodia endure this pandemic, and to come out of it stronger with a greener and more productive future. Together, we can do this.

Mariam Sherman is World Bank country director for Cambodia, Myanmar and Laos

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