How to ensure funds are used well in tough times

How to effectively manage government funds earmarked for poverty alleviation?

Look at it any which way, it is one heck of a challenge for the authorities concerned at all levels.

In China, the challenge, however, reflects a deep-seated reform of the country's fiscal management system.

The Ministry of Finance identified 42 items listed in a general ledger to define the range of activities to be covered by the central government's anti-poverty funds.

These include investment in infrastructure construction for relocating residents living in poor and remote areas, funds for developing tourism, and public healthcare service subsidies.

In March 2018, at a media conference during the annual meeting of the National People's Congress, I had asked Hu Jinglin, then vice finance minister, how to regulate the large amount of funds allocated to beat poverty.

"As the government's spending is increasing to a huge amount in this area, it is true that it brings us pressure of regulation," Hu said. "In order to strengthen supervision, the Ministry of Finance and the other departments concerned have introduced a set of measures to tighten fund management."

Illegal use of the anti-poverty funds is a real concern, he said. Some local governments had reported fake projects or tended to spend the money for other purposes.

Earlier this months, an official from the Office of the Leading Group for Poverty Alleviation of the Ministry of Finance, told me that financial departments at all levels have attached great importance to the use and management of poverty-alleviation funds, and have taken solid steps to tighten supervision.

That year, the Finance Ministry chased back 730 million yuan of anti-poverty funds that had been misused in 2017.

The investigation covered 874 counties across the country, Hu said then. "From this year (2018) to 2021, every year, we will focus on checking the usage of special funds for poverty alleviation, making sure that all the money can be injected into the right areas."

A tracker from the World Bank showed the poverty headcount ratio at national poverty lines, or the percentage of population under the poverty lines. For China, the proportion declined to 1.7 percent in 2018 from 8.5 percent in 2013. And the government fund for beating poverty increased by more than 20 percent annually since 2013.

Since China began to open up and reform its economy in 1978, GDP growth has averaged almost 10 percent a year, and more than 850 million people have been lifted out of poverty. But about 373 million Chinese are still living below the upper-middle-income poverty line of $5.50 a day, the World Bank said.

By the end of this year, China will like to be a poverty-free, moderately prosperous nation, in spite of the havoc wreaked by the COVID-19 pandemic.

The poverty-elimination process would be in line with the overall economic rebalancing process－orienting the structure of the economy to higher-end manufacturing and services from the low-end activities, and shifting the emphasis from investment to consumption upgrade.

And the most immediate challenge is the impact of COVID-19 on the economy, which may lead to labor dislocation and slower growth in household incomes.

The country's target to "win the tough battle to end poverty" in time, however, is achievable, especially as policymakers have noted that the key is to close the gaps in China's social protection coverage, in order to help protect workers and households from the distress caused by job and income losses, and also to boost private consumption.