Financing strategies for social protection in the Pacific and Timor-Leste explored in webinar

In recent years, many countries in the Pacific region have allocated more funds to their social protection programs, seeing them as essential in both good and bad times.

Yet, despite this growing commitment, significant gaps remain in expenditure and coverage across the Pacific.

“Some countries, like the Cook Islands, Fiji and Kiribati, are investing significantly more across the life cycle, while other countries effectively have no government social protection programs for their citizens,” said Rachel Payne, Deputy Team Leader for Partnerships for Social Protection (P4SP).

The challenges of financing social protection in resource-constrained environments were discussed in a webinar, Financing social protection in the Pacific and Timor-Leste, on 15 August 2024.

Hosted by the Australian Government’s P4SP program on socialprotection.org, the webinar showcased country and donor views on funding social protection.

Slow and steady approach

In most Pacific island countries, social protection competes with other sectors for budget allocations. This is in the face of challenging economic conditions, including sluggish economic recovery, cash shortages, significant fiscal deficits, ambitious but unachieved revenue projections, and massive political priorities.

In this context, a promising approach to strengthen social protection is by making gradual changes to existing programs.

The evolving Social Welfare Scheme for the Elderly in Tonga is a standout example.

"The scheme started [in 2012] with slightly over 2,000 members, and the age eligibility was capped at 75 years old for only 65 Pa’anga per head per month,” explained Tevita Tonga, CEO of the National Retirement Benefits Fund and Social Welfare Scheme in Tonga.

“Over time, the age eligibility has decreased while the monthly stipend per member has increased.

“In July 2024, the government decreased the age eligibility to 67 years old and increased the monthly allowances,” he said.

In July 2026, the age eligibility will be further lowered to 63 years old.

This approach is also seen in several other countries in the region, noted Charles Knox-Vydmanov, a social protection consultant for P4SP.

“Small adjustments yearly can lead to quite big changes within 5 to 10 years.

“It's also about proof of concept. Having something in place, being able to show the impacts it has, being able to study it, and then show what that's doing.

“It helps make the case for investing in social protection.”

In focus: Social protection in Fiji

Social assistance in Fiji dates to the 1920s, but the system has evolved significantly over the last decade.

In normal times, social assistance is fully funded through domestic resources, explained Kelera Kolivuso-Ravono, Acting Head of Budget, Ministry of Finance, Fiji.

“It is one of our longstanding programs. It’s an ongoing commitment of the government.”

Over the last 10 years, Fiji has expanded its social assistance programs to cover 105,000 recipients—around 12% of the population. Since 2013, the cost of social assistance has increased from 0.4 percent of gross national income to 1.4 percent in 2023-24.

"With this expansion, some of the measures we have undertaken include reallocation of public expenditures, increasing tax revenues, negotiating budget support from our donors, and restructuring our existing debt," Kelera said

“We’re also working with development partners to strengthen our social protection systems through improved delivery, targeting, coverage and adequacy with a focus on leaving no one behind.”

Political stability has been a key success factor, said Kelera.

“We have good interaction and commitment from government; all the line ministers are involved and agree when this is needed for the economy.

“That has helped us to have effective and accountable social protection systems in Fiji.”

Cash transfers buffer acute shocks

Official Development Assistance (ODA) is an important financing option for countries that might not be able to afford funding social protection programs alone, particularly in times of crises.

“In Fiji, any social protection programs that arise [unexpectedly] during a financial year, like due to a cyclone or any other pandemic, is where we have to reallocate resources or seek donor support,” Kelera said.

Fiji has relied on ODA to partially finance its social protection expenditure during and following shocks, most notably after Tropical Cyclone Winston in 2016 and in the COVID-19 pandemic.

Kelera shared that during COVID-19, the Fijian Government rolled out cash assistance programs, benefitting around 400,000 individuals with a total payout of around 430 million Fijian dollars.

Similarly, in Tonga, the Australian Government funded cash top ups of 200 Pa’anga provided to elderly beneficiaries in March 2022. This was part of the Tongan Government’s response to the volcano eruption and COVID-19 pandemic.

Such cash transfers are “tremendously valuable and important”, said Jonathan Pryke, Lead Economist, Office of the Pacific, Australian Department of Foreign Affairs and Trade.

"Social protection has been an excellent tool, enabling us [DFAT] to respond rapidly to assist efforts in the Pacific in times of acute shock.

“When targeted correctly or when driving the right reforms, these schemes can provide economic stimulus as well as improved welfare outcomes all with marginal overhead or transaction costs.

“This is backed up by phenomenal global evidence, showing cash transfers have a profound impact on school enrolment, food security, labour supply, wellbeing, and accumulation of financial assets.”

Exploring finance options

The discussion was underpinned by a new P4SP research report, with the webinar marking its official launch.

Investing in social protection in good times and bad: An assessment of social protection financing in the Pacific and Timor-Leste looks at the current and historical levels of social protection expenditure in 14 countries in the region.

It maps out options for countries to sustainably finance social expenditure, said Jesse Doyle, Senior Social Protection Specialist for P4SP and a co-author of the report with Charles.

“Countries can leverage domestic financing sources. That could come from introducing personal income regimes, removing some tax exemptions placed on foreign and domestic investors, reallocating existing expenditure from other sectors, and expanding sources of sovereign rents.

“It will also be important for countries to crowd in ODA strategically, both for their systems’ function but also shock responsive transfers.”

Managing bilateral debt levels with caution is another factor, said Jesse.

“When debt to GDP ratios approach the 80% to 100% mark, it can place pressure on other forms of government expenditure.”

Countries’ ongoing commitment to funding these systems, even in the face of economic challenges, will be crucial in ensuring that no one is left behind.

Building a robust evidence base specific to the Pacific context, along with ongoing knowledge sharing, will support countries to advocate for increased investment in social protection.