defined in this paper as households whose probability of falling below the national poverty threshold is in excess of 10 percent, nearly doubled.

Third, reliable strategies for households to cope with negative income shocks, barring reducing expenditures, appear to be few. Households rely on in‐kind income, which can be substantial, at 5 percent of cash income on average, and it does have an impact on the poverty headcount. However, there do not appear to be many opportunities for employing active coping strategies such as searching for additional income or employment, while government transfers also do not appear to be providing the necessary counter‐cyclical mitigating effects to households that are vulnerable to the risk of poverty.

The most immediate policy considerations should focus on the design of the overall safety net, to ensure that it provides an adequate coverage and targeting. The recently completed Commitment to Equity analysis (Bornukova et al., 2017) finds that while government transfers contribute significantly to poverty and inequality reduction, they are not designed to react to the crisis efficiently, as they are (i) not needs‐based and (ii) linked to average wages, and hence pro‐cyclical. The automatic stabilizer programs like the unemployment benefit or the needs‐based assistance to the poor exist, but they are small in size and in coverage; hence, they had very little effect on income smoothing during the crisis (in 2016 only 3 percent of the population were covered by the needs‐based assistance to the poor). Ongoing work on commitment to equity for children (Bornukova et al., 2019) highlights important omissions and drawbacks in coverage of some of the vulnerable groups such as households with three or more children, and single‐parent households. This analysis shows that categories such as households with 3 or more children and single‐parent households were among the ones that suffered the most acute reductions in cash incomes during the recession years, despite already low income levels, on average, prior to the recession. Making changes to the design of the safety net to ensure that groups such as these do not fall through the cracks is important for their ability to cope with future income shocks.

The fact that much of the adjustment to negative income shocks happens through reductions in expenditure, and that active coping strategies such as searching for additional jobs or employment are not common, partly because of deteriorating labor market conditions during a recession, reinforce the importance of improving the design of safety nets. However, the ongoing long‐term shedding of labor by firms, particularly in the SOE sector, reinforces the need to strengthen the income support to the unemployed as part of the structural reforms agenda in Belarus. Unemployment benefits have been shown by the CEQ to be a very cost‐efficient program in reducing poverty, relative to other fiscal interventions, but the program (and the size of the benefit, relative to the average wage) is very small and serves a small share of the unemployed. Policy options such as unemployment insurance, perhaps in combination with an unlimited duration means‐tested social assistance component, could potentially offer improved possibilities of consumption smoothing for laid‐off workers, as well as better coverage of vulnerable households upon the expiration of UI benefits.

The analysis of adjustments of expenditure patterns during the recession revealed also the limited ability of lower income households to reduce expenditures on utilities, relative to higher‐income households. While the data do not allow the possibility to examine explicitly the reasons behind changes in utilities expenditures, it is plausible, that this is in part due to the fact that energy consumption in households vulnerable to poverty is already close to the minimum amount for basic needs; similarly, these households may have limited ability to introduce energy efficiency improvements. As energy tariffs continue increasing toward cost recovery, having an effective system for mitigating the effects of higher tariffs for low income households will thus be critical, as simulations suggest that the budget share that low income households spend on utilities could increase notably as tariffs rise, unless adequate mitigation measures, ideally targeted to low‐income households, are in place.

25