Keep the Pace

Investment Rating - The report does not explicitly provide an investment rating for the industry under review [3]. Core Insights - The indexation of benefits to inflation is a crucial yet underexplored aspect of adaptive social protection (ASP) systems, which can enhance the adequacy of cash transfers in response to changing economic conditions [11][12]. - A comprehensive analysis of 232 non-contributory cash transfer programs across 158 countries reveals that nearly 80% of these programs incorporate some form of discretionary or automatic indexation, with about one-third utilizing automatic adjustments [12][13]. - The report highlights the evolution of indexation practices over time, noting that while higher-income countries typically have established indexation systems, emerging experiences in lower-income contexts are also noteworthy [13][15]. Summary by Sections Introduction - Food prices have been rising significantly, with some countries experiencing annual food inflation exceeding 40%, and in Argentina, it reached 293% [18]. - The long-term trend shows that real food prices in 2024 are approximately 20% higher than a decade ago and double the levels of the previous two decades [18]. The Case for and Against (Automatic) Indexation - Indexation can be discretionary or automatic, with automatic adjustments providing more predictability and transparency [40]. - Automatic indexation is more prevalent in higher-income countries, while lower-income contexts have fewer examples [65]. Results from Global Indexation Database - Approximately 79% of cash transfer programs adjust benefits, with 68% using ad hoc changes and 32% employing automatic adjustments [60]. - Social pensions are the most commonly automatically indexed cash transfers, with 38% of such programs featuring automatic indexation [70]. Evolution and Adaptations - The report documents significant changes in indexation methods, mechanisms, and frequencies across various countries, illustrating a dynamic evolution in response to inflationary pressures [13][15]. - Countries like India have successfully implemented automatic indexation linked to specific price indices, demonstrating effective adaptation to inflation [47][90]. Conclusions - The report emphasizes the need for a tailored approach to indexation, considering the specific context and objectives of cash transfer programs [16][32]. - It identifies a rich operational agenda for policymakers to enhance the effectiveness of indexation mechanisms in social protection systems [16].