Romania will receive a EUR 500 million investment loan for its Social Assistance Reform Strategy from the World Bank, provided the country has certain results within this program, such as providing stronger incentives for people who live on social benefits. The project has been recently approved by the WB executive directors. This social assistance reform project, which was adopted by the Romanian Government in March 2010, aims to improve the overall performance of Romania’s social assistance system by strengthening performance management, improving equity and administrative efficiency, and reducing error and fraud.
The planned social assistance measures aim to provide work incentives for some adults by reducing the marginal tax rate on earnings for the child raising benefit, reducing the duration of the child raising benefit to one year for high income earners, and increasing the back-to-work bonus, eliminating the false disabled who could work but were living on benefits and introducing stronger work- and activation-requirements in the guaranteed minimum income program.
The project will focus on the Government’s programs for low-income households and vulnerable groups, such as the disabled, needy families, single parents, Roma households, and the rural poor. “The Government of Romania has launched an ambitious and comprehensive social assistance reform program,” says Peter Harrold, Country Director for Romania at the World Bank.
This partnership between Romania and the World Bank will contribute to Romania’s long-term goals to achieve growth and convergence with other EU countries, while protecting the poor and vulnerable. During 2005-2010, the fiscal cost of social assistance rose from 1.5 to 2.9 percent of GDP.
The project is expected to also have a positive impact on the country’s labor market. Romania has a large number of work-able adults on social assistance that are not in employment, education, training, or are disabled, estimated at about 1.8 million. This is 22 percent of the working age beneficiaries of social assistance, according to a World Bank statement.
Romania’s overall Social Assistance Program is estimated at EUR 5.5 billion.