This document analyzes the distributional impact of economic and climate-related shocks in Colombia and the capacity of the social protection system to respond effectively. The report uses the Social Protection Stress Test Tool (STT) to assess the adaptiveness of the social protection system and provides policy recommendations for improvements. This analysis is particularly valuable for policymakers in Colombia looking to enhance the resilience of their social protection programs.
Key Insights
A severe climate shock would increase poverty and inequality, affecting the poorer regions disproportionately more
The study finds that a severe climate-related hydrometeorological shock would lead to a decline in per capita income by 1.1% on average in affected departments. In Magdalena, total poverty would increase by 3 percentage points, and extreme poverty by 4 percentage points. Compensating for this would require additional investments or redistribution of existing resources towards a more effective system.
The COVID-19 pandemic showed the devastating welfare impacts of such a shock
The COVID-19 pandemic led to a 6.8 percentage point increase in poverty in 2020, and income inequality rose sharply. About 3.6 million people are estimated to have become poor, and the Gini coefficient went from 0.52 in 2019 to 0.54 in 2020. Government emergency transfers mitigated about a quarter of the negative impact of the crisis on poverty.
Programs & Delivery System
The assessment revealed that to respond to recent shocks the government of Colombia has introduced incipient adaptation measures and changes in SP programs design and delivery; yet there is room for improvement. Measures include temporary suspension of the conditionalities of existing programs, creation of new (emergency programs) and launching of emergency funding mechanisms.
Data and Information
The assessment found that the social registry, Sisbén, has been strengthened and has moved towards the consolidation of an integrated and dynamic social registry: the Registro Social de Hogares (RSH). However, in terms of Early Warning Systems (Sistemas de Alertas Tempranas – SAT), there is room to improve the capacity to adequately alert communities and municipalities and the monitoring of most relevant disaster threats or climate change impacts.
Adaptable financing to respond to shocks
Social protection programs are financed with public resources generated by tax revenues, and, in general, no external or additional financing resources are allocated for these purposes. The regional distribution of CT social spending is concentrated in six departments that do not necessarily coincide with the departments that have larger risks to be affected by hydroclimatic shocks.
Institutional arrangements
There is no legal structure that supports an Adaptive Social Protection System (ASPS), nor regulations or coordination mechanisms to create synergies between the Disaster Risk Management (DRM) and SP sectors.
Key Statistics & Data
- Poverty increased 6.8 percentage points in 2020 due to the COVID-19 pandemic.
- About 3.6 million people are estimated to have become poor due to COVID-19.
- The Gini coefficient went from 0.52 in 2019 to 0.54 in 2020.
- In Magdalena, with a poverty rate of 53.5 % at baseline, total poverty would increase by 3 percentage points, and extreme poverty by 4 percentage points after a severe climate shock.
Methodology
The analysis uses the Stress Test Tool (STT), developed by the World Bank, to assess the adaptiveness of the social protection system, especially its ability to respond to shocks. The tool puts forward two types of analyses: (i) assessment of the distributional impact of shocks through scenarios that examine key sources of risk and estimate the potential population affected including the impacts on poverty and inequality; (ii) assessment of the Scalability and Adaptiveness of Social Protection tool, which assesses the capacity of the social protection system to adapt and build resilience against different shocks. Four main building blocks for measuring system adaptability are discussed in this section: (a) programs and delivery systems, (b) data and information, (c) financing and (d) institutional arrangements and partnerships. Data sources include microdata from GEIH 2019 and administrative data of number of people affected and dwelling (RUD) by the 2010-2011 Ola Invernal.
Implications and Conclusions
The study concludes that Colombia’s social protection system is in an “Emerging” state of adaptiveness. Policy recommendations include rethinking program design and delivery, ensuring adequate funding, directing resources to high-risk regions, and strengthening coordination between relevant agencies. These are essential steps to enhance the social protection system’s ability to respond against co-variant shocks and increase the resilience of poor households.
Key Points
- Colombia is highly vulnerable to economic and climate-related shocks, which can derail progress in poverty reduction.
- The COVID-19 pandemic highlighted the strengths and fragilities of Colombia's social protection system in responding to crises.
- Hydrometeorological shocks disproportionately affect poorer regions, increasing poverty and inequality.
- The social protection system in Colombia has limitations in its ability to cushion the impacts of shocks on all poor and vulnerable populations.
- Adaptive Social Protection (ASP) helps build resilience by enabling households to prepare for, cope with, and adapt to shocks.
- Improvements in data and information systems, financing mechanisms, and institutional arrangements are needed to enhance the adaptiveness of Colombia's social protection system.
- Policy options include rethinking program design, ensuring adequate funding, directing resources to high-risk regions, and strengthening coordination between relevant agencies.