Governments across the Pacific region and Timor-Leste have been investing in formal social protection systems for over fifty years, with significant changes occurring in the last two decades. Social assistance expenditures have nearly doubled, broadening access to benefits for many individuals. Despite differences in progress among nations, common trends offer valuable insights for future social protection initiatives.
A recent report by the Australian Government-backed program, Partnerships for Social Protection (P4SP), examined investment trends in social protection systems across the region. The study, titled “Investing in Social Protection for Good Times and Bad: An Assessment of Social Protection Financing in the Pacific and Timor-Leste,” assesses who funds social protection, how investments have changed, the effects of inflation, and the fiscal outlook post-COVID-19. It builds upon previous P4SP research analyzing social protection spending in ten regional countries.
Notably, age and disability benefits are crucial components of social protection in the Pacific and Timor-Leste. While such programs exist in numerous low- and middle-income nations globally, eight of the fourteen Pacific nations analyzed offer both, generally on a universal basis. Countries like the Marshall Islands, Papua New Guinea, Timor-Leste, and Tonga have introduced innovative cash incentives for families with children, targeting previously unsupported demographics.
Since 2013, social assistance expenditures have surged from 0.9% to 2.3% of Gross National Income (GNI). Kiribati has seen the most significant growth, launching a large-scale unemployment benefit initiative while expanding its Senior Citizens Allowance. Meanwhile, Fiji’s government has tripled its social protection spending over the last decade, with notable increases in the past five years.
Social assistance programs have made strides in reducing poverty levels. In the Cook Islands, two-thirds of households receive child benefit payments, contributing to a one-third decrease in the child poverty rate. Similarly, Kiribati’s major social assistance programs are estimated to have significantly reduced its national poverty rate.
The COVID-19 pandemic spurred increased investment in social protection systems, enabling countries with pre-existing frameworks to allocate additional support effectively. Even as the pandemic diminishes, nations continue to enhance their social protection systems, emphasizing their importance in supporting vulnerable populations during both crisis and recovery, as well as their role in legitimizing governments.
Official development assistance (ODA) has been crucial in financing social protection in the Pacific during the pandemic, with regional allocations surging to nearly USD 90 million in 2021, markedly higher than prior years. This assistance will remain vital for the sustained development of long-term social protection frameworks across the region. Countries including the Marshall Islands, Papua New Guinea, Tonga, and Timor-Leste have benefited from ODA, implementing new child and family benefit schemes.
Social assistance has also played a role in safeguarding households against inflation, particularly where benefit levels are adequate. Notable examples include Timor-Leste and the Cook Islands, where age and disability benefits surpass international averages, while Kiribati’s age pension is among the highest globally in this context.
No Pacific nation currently indexes social assistance benefits to inflation formally, but some have implemented ad hoc increases to aid households. Fiji’s government, for instance, adjusted benefits in response to inflation in 2022 and further enhanced them in 2023. Conversely, in some countries, low benefit levels left households vulnerable to inflation.
Looking ahead, it is crucial for Pacific nations and Timor-Leste to adapt their investment strategies in social protection amid fiscal challenges, such as limited economic growth, rising populations, and the high costs associated with remote public service delivery and disaster responses. Countries can explore various funding options, including mobilizing domestic resources, allocating greater shares from natural resource rents, and leveraging international aid.
Incremental reforms to eligibility criteria and benefit levels, alongside the introduction of new programs, could broaden social protection coverage sustainably. Development partners will continue to contribute, but the majority of investment needs to come from domestic sources to ensure the wellbeing of current beneficiaries. Moreover, establishing formal indexation measures will be essential to shield recipients from inflation-related challenges.