Governments in the Pacific region and Timor-Leste have been focusing on formal social protection systems for over 50 years. However, significant changes have occurred in the last two decades. Social assistance program expenditures in the region have nearly doubled, with benefits gradually reaching more individuals. While some nations have advanced their systems more than others, the overall trends provide insights for future growth and investments in social protection.
A recent study funded by the Australian Government’s Partnerships for Social Protection (P4SP) examined the evolving landscape of social protection investments in the region. The report titled “Investing in social protection for good times and bad: An assessment of social protection financing in the Pacific and Timor-Leste” discusses the financing sources for social protection, investment developments, inflation impacts, and the fiscal outlook for these nations as they recover from the COVID-19 pandemic. This research builds on previous P4SP findings regarding social protection expenditures in ten regional countries.
Age and disability benefits are key components of the social protection systems in the Pacific and Timor-Leste. Eight out of 14 studied Pacific nations offer both schemes, typically on a universal basis. Additionally, countries such as the Marshall Islands, Papua New Guinea, Timor-Leste, and Tonga have introduced new cash benefits for families with children, expanding support for demographics that previously lacked formal assistance.
Since 2013, social assistance spending in countries that provide such benefits has more than doubled, rising from 0.9% to 2.3% of Gross National Income (GNI). Kiribati has made significant advancements by implementing a large-scale unemployment benefit scheme and widening the scope of its Senior Citizens Allowance. Likewise, Fiji has increased its social protection expenditures threefold over the last decade, with the most substantial growth occurring in the past five years.
Social assistance plays a pivotal role in reducing poverty. For instance, in the Cook Islands, over two-thirds of households benefit from child payments, which have contributed to a one-third reduction in the child poverty rate. Additionally, Kiribati’s major social assistance programs are believed to have significantly decreased the national poverty rate.
The COVID-19 pandemic triggered a surge in investments in social protection systems. Nations with existing frameworks could leverage them to offer support, such as benefit enhancements in Timor-Leste and Fiji.
As the crisis recedes, many countries continue to improve their social protection frameworks, highlighting their importance in both favorable and challenging times. These systems not only help families and economies during crises but also build the foundation for prosperity in stable periods. Furthermore, the provision of social protection enhances government legitimacy in democratic states.
Official development assistance (ODA) played a crucial role in financing social protection during the pandemic, with allocations rising to nearly USD90 million in 2021—more than three times the highest amounts received during the previous decade. This increase had a significant impact, representing over one percent of GNI in countries like Fiji, Marshall Islands, Palau, Tonga, and Tuvalu.
Beyond the pandemic, ODA is facilitating the long-term development of social protection systems across the region. For example, financial and technical support through ODA has implemented new child and family benefits in nations such as the Marshall Islands, Papua New Guinea, Tonga, and Timor-Leste. Although current ODA levels are much lower than during the pandemic, they continue to play a role in financing social protection transfers.
Social assistance has also shielded households from inflation in regions where benefit levels are adequate. In Timor-Leste and the Cook Islands, age and disability benefits exceed international averages, while Kiribati’s pension rates are among the highest globally.
Despite the lack of formal indexing for social assistance benefits to inflation, some countries have made ad hoc adjustments to alleviate household burdens. For instance, Fiji’s government enacted temporary inflation mitigation measures in 2022 and increased benefits further in 2023 to address rising costs. However, many countries struggle as low benefit levels restrict their ability to provide adequate protection against inflation.
As nations reflect on past social protection investments, they can also foresee future developments critical for managing fiscal constraints, population growth, rising public service delivery costs in remote areas, and increasing government expenditures for disaster responses.
Countries have several financing avenues for social protection, including increasing domestic revenue, reallocating budgets from other sectors, boosting social protection shares in ODA, and expanding external debt. The suitability of these options varies depending on national contexts and policy decisions.
A pragmatic approach focused on gradual adjustments to eligibility and benefit levels, alongside the introduction of new initiatives, can sustainably extend coverage over time. This will require countries to assess the full range of financing options available.
While development partners will remain crucial in financing social transfers and strengthening systems, the majority of investment will need to arise from domestic sources. Ensuring quality of life for current social protection beneficiaries is vital, leading countries to explore formal measures to safeguard recipients against inflation-related challenges.
This research was funded by the Australian Department of Foreign Affairs and Trade (DFAT). The views expressed belong solely to the authors and do not necessarily reflect those of the Australian Government or Development Pathways.
Jesse Doyle is a Senior Social Protection Specialist (Economics) with the Australian Government’s Partnerships for Social Protection program. Charles Knox-Vyd Manov is an independent consultant specializing in social protection assessment and design.