Adequacy and coverage of Social Assistance Scheme in Albania: a microsimulation analysis using ALBMOD

Ndihma Ekonomike (NE), Albania's main poverty-targeted social assistance programme, has long been chracterised by low coverage and inadequate benefit levels, and its capacity to mitigate poverty has been further weakend by the COVID-19 pandemic and the subsequent food and energy price shocks. Using ALBMOD, a newly developed tax-benefit microsimulation model, this paper evaluates alternative reform options for the NE programme. We first show that the current scheme reduces poverty and inequality only modestly. We then simulate two types of reforms: adequacy reforms (uprating benefits by food prices or by the minimum wage growth, or setting the single-adult benefit at 50% of the poverty line) and coverage reforms (extending eligibility to households with income up to the minimum wage and raising the child top-up from 300 to 3,000 ALL per month). Coverage reforms are far more cost-effective than uprating, achieving 86% of the Gini reduction of the most expensive adequacy scenario at less than 39% of its cost. The two reform families benefit different groups: adequacy reforms mainly help childless working-age households, whereas coverage reforms favour single parents and large families. Combined packages reach more households and reduce poverty further, but at a higher cost, and large families and single elderly adults remain at high risk of poverty. Even so, all the reforms remain a small share of public expenditure: NE currently absorbs only 0.47% of total public expenditure, and the most generous combined package would raise this to about 2.3%. Overall, the findings point to the need for a fundamental restructuring of NE, with a transparent benefit formula, entitlements linked to household size and composition, and benefits anchored to an objective external benchmark so that the programme can act as an automatic stabiliser in times of crisis.