Governments in the Pacific region and Timor-Leste have been engaged in formal social protection efforts for over 50 years, with significant changes occurring in the last two decades. Social assistance program expenditures have nearly doubled across the region, expanding benefits to reach a larger population. While some countries are making substantial progress, others are falling behind. An Australian Government-backed study, Partnerships for Social Protection (P4SP), examines the trends in social protection investments within 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” explores the financing of social protection, how investments have evolved, the effects of inflation, and the fiscal outlook for these nations in the post-COVID-19 era. This study builds on previous P4SP research that evaluated social protection spending across 10 regional countries.
Age and disability benefits are crucial components of the social protection frameworks in the Pacific and Timor-Leste. Among the 14 Pacific nations studied, eight provide both types of benefits, generally on a universal basis. Countries like the Marshall Islands, Papua New Guinea, Timor-Leste, and Tonga are also trialing innovative cash benefits for families with children, thereby assisting previously unsupported groups.
Since 2013, social assistance expenditures have surged from 0.9% to 2.3% of Gross National Income (GNI). Kiribati saw the most significant surge, introducing a large-scale unemployment benefit program and enhancing its Senior Citizens Allowance. Additionally, Fiji has tripled its social protection spending over the past decade, with notable increases in the last five years.
Social assistance plays a crucial role in alleviating poverty. In the Cook Islands, child benefit payments reach over two-thirds of households, significantly reducing child poverty from 17% to 12%. In Kiribati, its major social assistance schemes are estimated to have reduced the national poverty rate by more than half.
The COVID-19 pandemic triggered a notable increase in investment in social protection systems, enabling nations with existing frameworks to distribute support, including benefit top-ups in Timor-Leste and Fiji.
As the impact of COVID-19 lessens, countries remain focused on refining their social protection systems, demonstrating their crucial role in supporting vulnerable populations. These systems not only aid households and economies during challenging times but also contribute to the foundations of stability and growth in favorable conditions. Enhanced social protection can reinforce the legitimacy and support of governments in democratic settings.
Official development assistance (ODA) has been pivotal in financing social protection during the pandemic, with allocations rising to nearly USD 90 million in 2021, surpassing previous decade maximums. This funding represented more than 1% of GNI for countries like Fiji, the Marshall Islands, Palau, Tonga, and Tuvalu.
Looking ahead, ODA is crucial for developing long-term social protection frameworks in the region. It has facilitated the introduction of new child and family benefits in countries including the Marshall Islands, Papua New Guinea, Tonga, and Timor-Leste. Although current ODA levels are lower than during the pandemic, there remains potential for it to finance social protection initiatives and establish sustainable systems.
Social assistance has also offered a buffer against inflation in nations where benefits are adequate. However, low benefit levels in some countries limit their ability to protect households from inflationary increases. The absence of formal indexing in social assistance benefits across the region means that occasional benefit adjustments are often necessary to help families cope with price hikes.
As Pacific island nations and Timor-Leste face fiscal pressures, including slow growth, population expansion, and rising public service costs, the approach to social protection financing must be strategic. Countries have various financing options, including mobilizing domestic revenue and reallocating expenditures.
A pragmatic, incremental approach that includes adjusting eligibility and benefit levels and introducing new programs can sustainably expand coverage. Although development partners will continue to assist in financing and enhancing transfer systems, most resources will derive from domestic avenues. Maintaining the quality of life for current beneficiaries will be essential, and nations may need to consider formal measures to adjust benefits in response to inflation.
This report follows an earlier blog discussing related evidence on social protection in the region. The Australian Department of Foreign Affairs and Trade (DFAT) and P4SP will conduct a webinar showcasing the report’s findings, scheduled for August 15 at 9:00 AM (AEST). The webinar will feature presentations from the authors and discussions with Pacific government and DFAT officials.
Jesse Doyle serves as a Senior Social Protection Specialist (Economics) at the Australian Government’s Partnerships for Social Protection program. Charles Knox-Vyd Manov is an independent consultant specializing in social protection assessment and design.